G.R. No.

113375 May 5, 1994

KILOSBAYAN, INCORPORATED, JOVITO R. SALONGA, CIRILO A. RIGOS, ERME

CAMBA, EMILIO C. CAPULONG, JR., JOSE T. APOLO, EPHRAIM TENDERO,
FERNANDO SANTIAGO, JOSE ABCEDE, CHRISTINE TAN, FELIPE L. GOZON,
RAFAEL G. FERNANDO, RAOUL V. VICTORINO, JOSE CUNANAN, QUINTIN S.
DOROMAL, SEN. FREDDIE WEBB, SEN. WIGBERTO TAADA, and REP. JOKER P.
ARROYO, petitioners,
vs.
TEOFISTO GUINGONA, JR., in his capacity as Executive Secretary, Office of the
President; RENATO CORONA, in his capacity as Assistant Executive Secretary and
Chairman of the Presidential review Committee on the Lotto, Office of the
President; PHILIPPINE CHARITY SWEEPSTAKES OFFICE; and PHILIPPINE
GAMING MANAGEMENT CORPORATION, respondents.

Jovito R. Salonga, Fernando Santiago, Emilio C. Capulong, Jr. and Felipe L. Gozon for
petitioners.

Renato L. Cayetano and Eleazar B. Reyes for PGMC.

Gamaliel G. Bongco, Oscar Karaan and Jedideoh Sincero for intervenors.

DAVIDE, JR., J.:

This is a special civil action for prohibition and injunction, with a prayer for a temporary
restraining order and preliminary injunction, which seeks to prohibit and restrain the
implementation of the "Contract of Lease" executed by the Philippine Charity
Sweepstakes Office (PCSO) and the Philippine Gaming Management Corporation
(PGMC) in connection with the on- line lottery system, also known as "lotto."

Petitioner Kilosbayan, Incorporated (KILOSBAYAN) avers that it is a non-stock domestic

corporation composed of civic-spirited citizens, pastors, priests, nuns, and lay leaders
who are committed to the cause of truth, justice, and national renewal. The rest of the
petitioners, except Senators Freddie Webb and Wigberto Taada and Representative
Joker P. Arroyo, are suing in their capacities as members of the Board of Trustees of
KILOSBAYAN and as taxpayers and concerned citizens. Senators Webb and Taada
and Representative Arroyo are suing in their capacities as members of Congress and as
taxpayers and concerned citizens of the Philippines.

The pleadings of the parties disclose the factual antecedents which triggered off the filing
of this petition.

Pursuant to Section 1 of the charter of the PCSO (R.A. No. 1169, as amended by B.P.
Blg. 42) which grants it the authority to hold and conduct "charity sweepstakes races,
lotteries and other similar activities," the PCSO decided to establish an on- line lottery
system for the purpose of increasing its revenue base and diversifying its sources of
funds. Sometime before March 1993, after learning that the PCSO was interested in
operating an on-line lottery system, the Berjaya Group Berhad, "a multinational company
and one of the ten largest public companies in Malaysia," long "engaged in, among others,
successful lottery operations in Asia, running both Lotto and Digit games, thru its
subsidiary, Sports Toto Malaysia," with its "affiliate, the International Totalizator Systems,
Inc., . . . an American public company engaged in the international sale or provision of
computer systems, softwares, terminals, training and other technical services to the
gaming industry," "became interested to offer its services and resources to PCSO." As an
initial step, Berjaya Group Berhad (through its individual nominees) organized with some
Filipino investors in March 1993 a Philippine corporation known as the Philippine Gaming
Management Corporation (PGMC), which "was intended to be the medium through which
the technical and management services required for the project would be offered and
delivered to PCSO." 1

Before August 1993, the PCSO formally issued a Request for Proposal (RFP) for the
Lease Contract of an on-line lottery system for the PCSO. 2 Relevant provisions of the
RFP are the following:
1. EXECUTIVE SUMMARY

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1.2. PCSO is seeking a suitable contractor which shall build, at its own
expense, all the facilities ('Facilities') needed to operate and maintain a
nationwide on-line lottery system. PCSO shall lease the Facilities for a fixed
percentage ofquarterly gross receipts. All receipts from ticket sales shall be
turned over directly to PCSO. All capital, operating expenses and expansion
expenses and risks shall be for the exclusive account of the Lessor.

xxx xxx xxx

1.4. The lease shall be for a period not exceeding fifteen (15) years.

1.5. The Lessor is expected to submit a comprehensive nationwide lottery

development plan ("Development Plan") which will include the game, the
marketing of the games, and the logistics to introduce the games to all the
cities and municipalities of the country within five (5) years.

xxx xxx xxx

1.7. The Lessor shall be selected based on its technical expertise, hardware
and software capability, maintenance support, and financial resources. The
Development Plan shall have a substantial bearing on the choice of the
Lessor. The Lessor shall be a domestic corporation, with at least sixty
percent (60%) of its shares owned by Filipino shareholders.

xxx xxx xxx

The Office of the President, the National Disaster Control Coordinating

Council, the Philippine National Police, and the National Bureau of
Investigation shall be authorized to use the nationwide telecommunications
system of the Facilities Free of Charge.
1.8. Upon expiration of the lease, the Facilities shall be owned by PCSO
without any additional consideration. 3

xxx xxx xxx

2.2. OBJECTIVES

The objectives of PCSO in leasing the Facilities from a private entity are as
follows:

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2.2.2. Enable PCSO to operate a nationwide on-line Lottery system at no

expense or risk to the government.

xxx xxx xxx

2.4. DUTIES AND RESPONSIBILITIES OF THE LESSOR

xxx xxx xxx

2.4.2. THE LESSOR

The Proponent is expected to furnish and maintain the Facilities, including

the personnel needed to operate the computers, the communications
network and sales offices under a build-lease basis. The printing of tickets
shall be undertaken under the supervision and control of PCSO. The
Facilities shall enable PCSO to computerize the entire gaming system.

The Proponent is expected to formulate and design consumer-oriented

Master Games Plan suited to the marketplace, especially geared to Filipino
gaming habits and preferences. In addition, the Master Games Plan is
expected to include a Product Plan for each game and explain how each
will be introduced into the market. This will be an integral part of the
Development Plan which PCSO will require from the Proponent.
 xxx xxx xxx

The Proponent is expected to provide upgrades to modernize the entire

gaming system over the life ofthe lease contract.

The Proponent is expected to provide technology transfer to PCSO

technical personnel. 4

7. GENERAL GUIDELINES FOR PROPONENTS

xxx xxx xxx

Finally, the Proponent must be able to stand the acid test of proving that it
is an entity able to take on the role of responsible maintainer of the on-line
lottery system, and able to achieve PSCO's goal of formalizing an on-line
lottery system to achieve its mandated objective. 5

xxx xxx xxx

16. DEFINITION OF TERMS

Facilities: All capital equipment, computers, terminals, software, nationwide

telecommunication network, ticket sales offices, furnishings, and fixtures;
printing costs; cost of salaries and wages; advertising and promotion
expenses; maintenance costs; expansion and replacement costs; security
and insurance, and all other related expenses needed to operate nationwide
on-line lottery system.6

Considering the above citizenship requirement, the PGMC claims that the Berjaya Group
"undertook to reduce its equity stakes in PGMC to 40%," by selling 35% out of the original
75% foreign stockholdings to local investors.

On 15 August 1993, PGMC submitted its bid to the PCSO.7

The bids were evaluated by the Special Pre-Qualification Bids and Awards Committee
(SPBAC) for the on-line lottery and its Bid Report was thereafter submitted to the Office
of the President. 8 The submission was preceded by complaints by the Committee's
Chairperson, Dr. Mita Pardo de Tavera. 9

On 21 October 1993, the Office of the President announced that it had given the
respondent PGMC the go-signal to operate the country's on-line lottery system and that
the corresponding implementing contract would be submitted not later than 8 November
1993 "for final clearance and approval by the Chief Executive." 10 This announcement
was published in the Manila Standard, Philippine Daily Inquirer, and the Manila Times on
29 October 1993. 11

On 4 November 1993, KILOSBAYAN sent an open letter to Presidential Fidel V. Ramos

strongly opposing the setting up to the on-line lottery system on the basis of serious moral
and ethical considerations. 12

At the meeting of the Committee on Games and Amusements of the Senate on 12

November 1993, KILOSBAYAN reiterated its vigorous opposition to the on-line lottery on
account of its immorality and illegality. 13

On 19 November 1993, the media reported that despite the opposition, "Malacaang will
push through with the operation of an on-line lottery system nationwide" and that it is
actually the respondent PCSO which will operate the lottery while the winning corporate
bidders are merely "lessors." 14

On 1 December 1993, KILOSBAYAN requested copies of all documents pertaining to the

lottery award from Executive Secretary Teofisto Guingona, Jr. In his answer of 17
December 1993, the Executive Secretary informed KILOSBAYAN that the requested
documents would be duly transmitted before the end of the month. 15. However, on that
same date, an agreement denominated as "Contract of Lease" was finally executed by
respondent PCSO and respondent PGMC. 16 The President, per the press statement
issued by the Office of the President, approved it on 20 December 1993. 17
In view of their materiality and relevance, we quote the following salient provisions of the
Contract of Lease:

1. DEFINITIONS

The following words and terms shall have the following respective
meanings:

1.1 Rental Fee Amount to be paid by PCSO to the LESSOR as

compensation for the fulfillment of the obligations of the LESSOR under this
Contract, including, but not limited to the lease of the Facilities.

xxx xxx xxx

1.3 Facilities All capital equipment, computers, terminals, software

(including source codes for the On-Line Lottery application software for the
terminals, telecommunications and central systems), technology,
intellectual property rights, telecommunications network, and furnishings
and fixtures.

1.4 Maintenance and Other Costs All costs and expenses relating to
printing, manpower, salaries and wages, advertising and promotion,
maintenance, expansion and replacement, security and insurance, and all
other related expenses needed to operate an On-Line Lottery System,
which shall be for the account of the LESSOR. All expenses relating to the
setting-up, operation and maintenance of ticket sales offices of dealers and
retailers shall be borne by PCSO's dealers and retailers.

1.5 Development Plan The detailed plan of all games, the marketing
thereof, number of players, value of winnings and the logistics required to
introduce the games, including the Master Games Plan as approved by
PCSO, attached hereto as Annex "A", modified as necessary by the
provisions of this Contract.
xxx xxx xxx

1.8 Escrow Deposit The proposal deposit in the sum of Three Hundred
Million Pesos (P300,000,000.00) submitted by the LESSOR to PCSO
pursuant to the requirements of the Request for Proposals.

2. SUBJECT MATTER OF THE LEASE

The LESSOR shall build, furnish and maintain at its own expense and risk
the Facilities for the On-Line Lottery System of PCSO in the Territory on an
exclusive basis. The LESSOR shall bear all Maintenance and Other Costs
as defined herein.

xxx xxx xxx

3. RENTAL FEE

For and in consideration of the performance by the LESSOR of its

obligations herein, PCSO shall pay LESSOR a fixed Rental Fee equal to
four point nine percent (4.9%) of gross receipts from ticket sales, payable
net of taxes required by law to be withheld, on a semi-monthly basis.
Goodwill, franchise and similar fees shall belong to PCSO.

4. LEASE PERIOD

The period of the lease shall commence ninety (90) days from the date of
effectivity of this Contract and shall run for a period of eight (8) years
thereafter, unless sooner terminated in accordance with this Contract.

5. RIGHTS AND OBLIGATIONS OF PCSO AS OPERATOR OF THE ON-

LINE LOTTERY SYSTEM

PCSO shall be the sole and individual operator of the On-Line Lottery
System. Consequently:
5.1 PCSO shall have sole responsibility to decide whether to implement,
fully or partially, the Master Games Plan of the LESSOR. PCSO shall have
the sole responsibility to determine the time for introducing new games to
the market. The Master Games Plan included in Annex "A" hereof is hereby
approved by PCSO.

5.2 PCSO shall have control over revenues and receipts of whatever nature
from the On-Line Lottery System. After paying the Rental Fee to the
LESSOR, PCSO shall have exclusive responsibility to determine the
Revenue Allocation Plan; Provided, that the same shall be consistent with
the requirement of R.A. No. 1169, as amended, which fixes a prize fund of
fifty five percent (55%) on the average.

5.3 PCSO shall have exclusive control over the printing of tickets, including
but not limited to the design, text, and contents thereof.

5.4 PCSO shall have sole responsibility over the appointment of dealers or
retailers throughout the country. PCSO shall appoint the dealers and
retailers in a timely manner with due regard to the implementation timetable
of the On-Line Lottery System. Nothing herein shall preclude the LESSOR
from recommending dealers or retailers for appointment by PCSO, which
shall act on said recommendation within forty-eight (48) hours.

5.5 PCSO shall designate the necessary personnel to monitor and audit the
daily performance of the On-Line Lottery System. For this purpose, PCSO
designees shall be given, free of charge, suitable and adequate space,
furniture and fixtures, in all offices of the LESSOR, including but not limited
to its headquarters, alternate site, regional and area offices.

5.6 PCSO shall have the responsibility to resolve, and exclusive jurisdiction
over, all matters involving the operation of the On-Line Lottery System not
otherwise provided in this Contract.
5.7 PCSO shall promulgate procedural and coordinating rules governing all
activities relating to the On-Line Lottery System.

5.8 PCSO will be responsible for the payment of prize monies, commissions
to agents and dealers, and taxes and levies (if any) chargeable to the
operator of the On-Line Lottery System. The LESSOR will bear all other
Maintenance and Other Costs, except as provided in Section 1.4.

5.9 PCSO shall assist the LESSOR in the following:

5.9.1 Work permits for the LESSOR's staff;

5.9.2 Approvals for importation of the Facilities;

5.9.3 Approvals and consents for the On-Line Lottery System;

and

5.9.4 Business and premises licenses for all offices of the

LESSOR and licenses for the telecommunications network.

5.10 In the event that PCSO shall pre-terminate this Contract or suspend
the operation of the On-Line Lottery System, in breach of this Contract and
through no fault of the LESSOR, PCSO shall promptly, and in any event not
later than sixty (60) days, reimburse the LESSOR the amount of its total
investment cost associated with the On-Line Lottery System, including but
not limited to the cost of the Facilities, and further compensate the LESSOR
for loss of expected net profit after tax, computed over the unexpired term
of the lease.

6. DUTIES AND RESPONSIBILITIES OF THE LESSOR

The LESSOR is one of not more than three (3) lessors of similar facilities
for the nationwide On-Line Lottery System of PCSO. It is understood that
the rights of the LESSOR are primarily those of a lessor of the Facilities,
and consequently, all rights involving the business aspects of the use of the
Facilities are within the jurisdiction of PCSO. During the term of the lease,
the LESSOR shall.

6.1 Maintain and preserve its corporate existence, rights and privileges, and
conduct its business in an orderly, efficient, and customary manner.

6.2 Maintain insurance coverage with insurers acceptable to PCSO on all

Facilities.

6.3 Comply with all laws, statues, rules and regulations, orders and
directives, obligations and duties by which it is legally bound.

6.4 Duly pay and discharge all taxes, assessments and government
charges now and hereafter imposed of whatever nature that may be legally
levied upon it.

6.5 Keep all the Facilities in fail safe condition and, if necessary, upgrade,
replace and improve the Facilities from time to time as new technology
develops, in order to make the On-Line Lottery System more cost-effective
and/or competitive, and as may be required by PCSO shall not impose such
requirements unreasonably nor arbitrarily.

6.6 Provide PCSO with management terminals which will allow real-time
monitoring of the On-Line Lottery System.

6.7 Upon effectivity of this Contract, commence the training of PCSO and
other local personnel and the transfer of technology and expertise, such that
at the end of the term of this Contract, PCSO will be able to effectively take-
over the Facilities and efficiently operate the On-Line Lottery System.

6.8 Undertake a positive advertising and promotions campaign for both

institutional and product lines without engaging in negative advertising
against other lessors.
6.9 Bear all expenses and risks relating to the Facilities including, but not
limited to, Maintenance and Other Costs and:

xxx xxx xxx

6.10 Bear all risks if the revenues from ticket sales, on an annualized basis,
are insufficient to pay the entire prize money.

6.11 Be, and is hereby, authorized to collect and retain for its own account,
a security deposit from dealers and retailers, in an amount determined with
the approval of PCSO, in respect of equipment supplied by the LESSOR.
PCSO's approval shall not be unreasonably withheld.

xxx xxx xxx

6.12 Comply with procedural and coordinating rules issued by PCSO.

7. REPRESENTATIONS AND WARRANTIES

The LESSOR represents and warrants that:

7.1 The LESSOR is corporation duly organized and existing under the laws
of the Republic of the Philippines, at least sixty percent (60%) of the
outstanding capital stock of which is owned by Filipino shareholders. The
minimum required Filipino equity participation shall not be impaired through
voluntary or involuntary transfer, disposition, or sale of shares of stock by
the present stockholders.

7.2 The LESSOR and its Affiliates have the full corporate and legal power
and authority to own and operate their properties and to carry on their
business in the place where such properties are now or may be conducted.
...
7.3 The LESSOR has or has access to all the financing and funding
requirements to promptly and effectively carry out the terms of this Contract.
...

7.4 The LESSOR has or has access to all the managerial and technical
expertise to promptly and effectively carry out the terms of this Contract. . .
.

xxx xxx xxx

10. TELECOMMUNICATIONS NETWORK

The LESSOR shall establish a telecommunications network that will

connect all municipalities and cities in the Territory in accordance with, at
the LESSOR's option, either of the LESSOR's proposals (or a combinations
of both such proposals) attached hereto as Annex "B," and under the
following PCSO schedule:

xxx xxx xxx

PCSO may, at its option, require the LESSOR to establish the

telecommunications network in accordance with the above Timetable in
provinces where the LESSOR has not yet installed terminals. Provided, that
such provinces have existing nodes. Once a municipality or city is serviced
by land lines of a licensed public telephone company, and such lines are
connected to Metro Manila, then the obligation of the LESSOR to connect
such municipality or city through a telecommunications network shall cease
with respect to such municipality or city. The voice facility will cover the four
offices of the Office of the President, National Disaster Control Coordinating
Council, Philippine National Police and the National Bureau of Investigation,
and each city and municipality in the Territory except Metro Manila, and
those cities and municipalities which have easy telephone access from
these four offices. Voice calls from the four offices shall be transmitted via
radio or VSAT to the remote municipalities which will be connected to this
voice facility through wired network or by radio. The facility shall be
designed to handle four private conversations at any one time.

xxx xxx xxx

13. STOCK DISPERSAL PLAN

Within two (2) years from the effectivity of this Contract, the LESSOR shall
cause itself to be listed in the local stock exchange and offer at least twenty
five percent (25%) of its equity to the public.

14. NON-COMPETITION

The LESSOR shall not, directly or indirectly, undertake any activity or

business in competition with or adverse to the On-Line Lottery System of
PCSO unless it obtains the latter's prior written consent thereto.

15. HOLD HARMLESS CLAUSE

15.1 The LESSOR shall at all times protect and defend, at its cost and
expense, PCSO from and against any and all liabilities and claims for
damages and/or suits for or by reason of any deaths of, or any injury or
injuries to any person or persons, or damages to property of any kind
whatsoever, caused by the LESSOR, its subcontractors, its authorized
agents or employees, from any cause or causes whatsoever.

15.2 The LESSOR hereby covenants and agrees to indemnify and hold
PCSO harmless from all liabilities, charges, expenses (including reasonable
counsel fees) and costs on account of or by reason of any such death or
deaths, injury or injuries, liabilities, claims, suits or losses caused by the
LESSOR's fault or negligence.
15.3 The LESSOR shall at all times protect and defend, at its own cost and
expense, its title to the facilities and PCSO's interest therein from and
against any and all claims for the duration of the Contract until transfer to
PCSO of ownership of the serviceable Facilities.

16. SECURITY

16.1 To ensure faithful compliance by the LESSOR with the terms of the
Contract, the LESSOR shall secure a Performance Bond from a reputable
insurance company or companies acceptable to PCSO.

16.2 The Performance Bond shall be in the initial amount of Three Hundred
Million Pesos (P300,000,000.00), to its U.S. dollar equivalent, and shall be
renewed to cover the duration of the Contract. However, the Performance
Bond shall be reduced proportionately to the percentage of unencumbered
terminals installed; Provided, that the Performance Bond shall in no case
be less than One Hundred Fifty Million Pesos (P150,000,000.00).

16.3 The LESSOR may at its option maintain its Escrow Deposit as the
Performance Bond. . . .

17. PENALTIES

17.1 Except as may be provided in Section 17.2, should the LESSOR fail to
take remedial measures within seven (7) days, and rectify the breach within
thirty (30) days, from written notice by PCSO of any wilfull or grossly
negligent violation of the material terms and conditions of this Contract, all
unencumbered Facilities shall automatically become the property of PCSO
without consideration and without need for further notice or demand by
PCSO. The Performance Bond shall likewise be forfeited in favor of PCSO.

17.2 Should the LESSOR fail to comply with the terms of the Timetables
provided in Section 9 and 10, it shall be subject to an initial Penalty of
Twenty Thousand Pesos (P20,000.00), per city or municipality per every
month of delay; Provided, that the Penalty shall increase, every ninety (90)
days, by the amount of Twenty Thousand Pesos (P20,000.00) per city or
municipality per month, whilst shall failure to comply persists. The penalty
shall be deducted by PCSO from the rental fee.

xxx xxx xxx

20. OWNERSHIP OF THE FACILITIES

After expiration of the term of the lease as provided in Section 4, the

Facilities directly required for the On-Line Lottery System mentioned in
Section 1.3 shall automatically belong in full ownership to PCSO without
any further consideration other than the Rental Fees already paid during the
effectivity of the lease.

21. TERMINATION OF THE LEASE

PCSO may terminate this Contract for any breach of the material provisions
of this Contract, including the following:

21.1 The LESSOR is insolvent or bankrupt or unable to pay its debts, stops
or suspends or threatens to stop or suspend payment of all or a material
part of its debts, or proposes or makes a general assignment or an
arrangement or compositions with or for the benefit of its creditors; or

21.2 An order is made or an effective resolution passed for the winding up

or dissolution of the LESSOR or when it ceases or threatens to cease to
carry on all or a material part of its operations or business; or

21.3 Any material statement, representation or warranty made or furnished

by the LESSOR proved to be materially false or misleading;
 said termination to take effect upon receipt of written notice of
termination by the LESSOR and failure to take remedial action
within seven (7) days and cure or remedy the same within
thirty (30) days from notice.

Any suspension, cancellation or termination of this Contract

shall not relieve the LESSOR of any liability that may have
already accrued hereunder.

xxx xxx xxx

Considering the denial by the Office of the President of its protest and the statement of
Assistant Executive Secretary Renato Corona that "only a court injunction can stop
Malacaang," and the imminent implementation of the Contract of Lease in February
1994, KILOSBAYAN, with its co-petitioners, filed on 28 January 1994 this petition.

In support of the petition, the petitioners claim that:

. . . X X THE OFFICE OF THE PRESIDENT, ACTING

THROUGH RESPONDENTS EXECUTIVE SECRETARY
AND/OR ASSISTANT EXECUTIVE SECRETARY FOR
LEGAL AFFAIRS, AND THE PCSO GRAVELY ABUSE[D]
THEIR DISCRETION AND/OR FUNCTIONS TANTAMOUNT
TO LACK OF JURISDICTION AND/OR AUTHORITY IN
RESPECTIVELY: (A) APPROVING THE AWARD OF THE
CONTRACT TO, AND (B) ENTERING INTO THE SO-
CALLED "CONTRACT OF LEASE" WITH, RESPONDENT
PGMC FOR THE INSTALLATION, ESTABLISHMENT AND
OPERATION OF THE ON-LINE LOTTERY AND
TELECOMMUNICATION SYSTEMS REQUIRED AND/OR
AUTHORIZED UNDER THE SAID CONTRACT,
CONSIDERING THAT:
 a) Under Section 1 of the Charter of the PCSO, the PCSO is prohibited from
holding and conducting lotteries "in collaboration, association or joint
venture with any person, association, company or entity";

b) Under Act No. 3846 and established jurisprudence, a Congressional

franchise is required before any person may be allowed to establish and
operate said telecommunications system;

c) Under Section 11, Article XII of the Constitution, a less than 60% Filipino-
owned and/or controlled corporation, like the PGMC, is disqualified from
operating a public service, like the said telecommunications system; and

d) Respondent PGMC is not authorized by its charter and under the Foreign
Investment Act (R.A. No. 7042) to install, establish and operate the on-line
lotto and telecommunications systems.18

Petitioners submit that the PCSO cannot validly enter into the assailed Contract of Lease
with the PGMC because it is an arrangement wherein the PCSO would hold and conduct
the on-line lottery system in "collaboration" or "association" with the PGMC, in violation of
Section 1(B) of R.A. No. 1169, as amended by B.P. Blg. 42, which prohibits the PCSO
from holding and conducting charity sweepstakes races, lotteries, and other similar
activities "in collaboration, association or joint venture with any person, association,
company or entity, foreign or domestic." Even granting arguendo that a lease of facilities
is not within the contemplation of "collaboration" or "association," an analysis, however,
of the Contract of Lease clearly shows that there is a "collaboration, association, or joint
venture between respondents PCSO and PGMC in the holding of the On-Line Lottery
System," and that there are terms and conditions of the Contract "showing that
respondent PGMC is the actual lotto operator and not respondent PCSO." 19

The petitioners also point out that paragraph 10 of the Contract of Lease requires or
authorizes PGMC to establish a telecommunications network that will connect all the
municipalities and cities in the territory. However, PGMC cannot do that because it has
no franchise from Congress to construct, install, establish, or operate the network
pursuant to Section 1 of Act No. 3846, as amended. Moreover, PGMC is a 75% foreign-
owned or controlled corporation and cannot, therefore, be granted a franchise for that
purpose because of Section 11, Article XII of the 1987 Constitution. Furthermore, since
"the subscribed foreign capital" of the PGMC "comes to about 75%, as shown by
paragraph EIGHT of its Articles of Incorporation," it cannot lawfully enter into the contract
in question because all forms of gambling and lottery is one of them are included in
the so-called foreign investments negative list under the Foreign Investments Act (R.A.
No. 7042) where only up to 40% foreign capital is allowed. 20

Finally, the petitioners insist that the Articles of Incorporation of PGMC do not authorize
it to establish and operate an on-line lottery and telecommunications systems.21

Accordingly, the petitioners pray that we issue a temporary restraining order and a writ of
preliminary injunction commanding the respondents or any person acting in their places
or upon their instructions to cease and desist from implementing the challenged Contract
of Lease and, after hearing the merits of the petition, that we render judgment declaring
the Contract of Lease void and without effect and making the injunction permanent. 22

We required the respondents to comment on the petition.

In its Comment filed on 1 March 1994, private respondent PGMC asserts that "(1) [it] is
merely an independent contractor for a piece of work, (i.e., the building and maintenance
of a lottery system to be used by PCSO in the operation of its lottery franchise); and (2)
as such independent contractor, PGMC is not a co-operator of the lottery franchise with
PCSO, nor is PCSO sharing its franchise, 'in collaboration, association or joint venture'
with PGMC as such statutory limitation is viewed from the context, intent, and spirit of
Republic Act 1169, as amended by Batas Pambansa 42." It further claims that as an
independent contractor for a piece of work, it is neither engaged in "gambling" nor in
"public service" relative to the telecommunications network, which the petitioners even
consider as an "indispensable requirement" of an on-line lottery system. Finally, it states
that the execution and implementation of the contract does not violate the Constitution
and the laws; that the issue on the "morality" of the lottery franchise granted to the PCSO
is political and not judicial or legal, which should be ventilated in another forum; and that
the "petitioners do not appear to have the legal standing or real interest in the subject
contract and in obtaining the reliefs sought." 23

In their Comment filed by the Office of the Solicitor General, public respondents Executive
Secretary Teofisto Guingona, Jr., Assistant Executive Secretary Renato Corona, and the
PCSO maintain that the contract of lease in question does not violate Section 1 of R.A.
No. 1169, as amended by B.P. Blg. 42, and that the petitioner's interpretation of the
phrase "in collaboration, association or joint venture" in Section 1 is "much too narrow,
strained and utterly devoid of logic" for it "ignores the reality that PCSO, as a corporate
entity, is vested with the basic and essential prerogative to enter into all kinds of
transactions or contracts as may be necessary for the attainment of its purposes and
objectives." What the PCSO charter "seeks to prohibit is that arrangement akin to a "joint
venture" or partnership where there is "community of interest in the business, sharing of
profits and losses, and a mutual right of control," a characteristic which does not obtain
in a contract of lease." With respect to the challenged Contract of Lease, the "role of
PGMC is limited to that of a lessor of the facilities" for the on-line lottery system; in "strict
technical and legal sense," said contract "can be categorized as a contract for a piece of
work as defined in Articles 1467, 1713 and 1644 of the Civil Code."

They further claim that the establishment of the telecommunications system stipulated in
the Contract of Lease does not require a congressional franchise because PGMC will not
operate a public utility; moreover, PGMC's "establishment of a telecommunications
system is not intended to establish a telecommunications business," and it has been held
that where the facilities are operated "not for business purposes but for its own use," a
legislative franchise is not required before a certificate of public convenience can be
granted. 24 Even granting arguendo that PGMC is a public utility, pursuant to Albano S.
Reyes, 25 "it can establish a telecommunications system even without a legislative
franchise because not every public utility is required to secure a legislative franchise
before it could establish, maintain, and operate the service"; and, in any case, "PGMC's
establishment of the telecommunications system stipulated in its contract of lease with
PCSO falls within the exceptions under Section 1 of Act No. 3846 where a legislative
franchise is not necessary for the establishment of radio stations."

They also argue that the contract does not violate the Foreign Investment Act of 1991;
that the Articles of Incorporation of PGMC authorize it to enter into the Contract of Lease;
and that the issues of "wisdom, morality and propriety of acts of the executive department
are beyond the ambit of judicial review."

Finally, the public respondents allege that the petitioners have no standing to maintain
the instant suit, citing our resolution in Valmonte vs. Philippine Charity Sweepstakes
Office. 26

Several parties filed motions to intervene as petitioners in this case, 27 but only the motion
of Senators Alberto Romulo, Arturo Tolentino, Francisco Tatad, Gloria Macapagal-
Arroyo, Vicente Sotto III, John Osmea, Ramon Revilla, and Jose Lina 28 was granted,
and the respondents were required to comment on their petition in intervention, which the
public respondents and PGMC did.

In the meantime, the petitioners filed with the Securities and Exchange Commission on
29 March 1994 a petition against PGMC for the nullification of the latter's General
Information Sheets. That case, however, has no bearing in this petition.

On 11 April 1994, we heard the parties in oral arguments. Thereafter, we resolved to

consider the matter submitted for resolution and pending resolution of the major issues in
this case, to issue a temporary restraining order commanding the respondents or any
person acting in their place or upon their instructions to cease and desist from
implementing the challenged Contract of Lease.

In the deliberation on this case on 26 April 1994, we resolved to consider only these
issues: (a) the locus standi of the petitioners, and (b) the legality and validity of the
Contract of Lease in the light of Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42,
which prohibits the PCSO from holding and conducting lotteries "in collaboration,
association or joint venture with any person, association, company or entity, whether
domestic or foreign." On the first issue, seven Justices voted to sustain the locus standi of
the petitioners, while six voted not to. On the second issue, the seven Justices were of
the opinion that the Contract of Lease violates the exception to Section 1(B) of R.A. No.
1169, as amended by B.P. Blg. 42, and is, therefore, invalid and contrary to law. The six
Justices stated that they wished to express no opinion thereon in view of their stand on
the first issue. The Chief Justice took no part because one of the Directors of the PCSO
is his brother-in-law.

This case was then assigned to this ponente for the writing of the opinion of the Court.

The preliminary issue on the locus standi of the petitioners should, indeed, be resolved in
their favor. A party's standing before this Court is a procedural technicality which it may,
in the exercise of its discretion, set aside in view of the importance of the issues raised.
In the landmark Emergency Powers Cases, 29 this Court brushed aside this technicality
because "the transcendental importance to the public of these cases demands that they
be settled promptly and definitely, brushing aside, if we must, technicalities of procedure.
(Avelino vs. Cuenco, G.R. No. L-2821)." Insofar as taxpayers' suits are concerned, this
Court had declared that it "is not devoid of discretion as to whether or not it should be
entertained," 30 or that it "enjoys an open discretion to entertain the same or not." 31 In De
La Llana vs. Alba, 32 this Court declared:

1. The argument as to the lack of standing of petitioners is easily resolved.

As far as Judge de la Llana is concerned, he certainly falls within the
principle set forth in Justice Laurel's opinion in People vs. Vera [65 Phil. 56
(1937)]. Thus: "The unchallenged rule is that the person who impugns the
validity of a statute must have a personal and substantial interest in the case
such that he has sustained, or will sustain, direct injury as a result of its
enforcement [Ibid, 89]. The other petitioners as members of the bar and
officers of the court cannot be considered as devoid of "any personal and
substantial interest" on the matter. There is relevance to this excerpt from a
separate opinion in Aquino, Jr. v. Commission on Elections [L-40004,
January 31, 1975, 62 SCRA 275]: "Then there is the attack on the standing
 of petitioners, as vindicating at most what they consider a public right and
not protecting their rights as individuals. This is to conjure the specter of the
public right dogma as an inhibition to parties intent on keeping public
officials staying on the path of constitutionalism. As was so well put by Jaffe;
"The protection of private rights is an essential constituent of public interest
and, conversely, without a well-ordered state there could be no enforcement
of private rights. Private and public interests are, both in a substantive and
procedural sense, aspects of the totality of the legal order." Moreover,
petitioners have convincingly shown that in their capacity as taxpayers, their
standing to sue has been amply demonstrated. There would be a retreat
from the liberal approach followed in Pascual v. Secretary of Public Works,
foreshadowed by the very decision of People v. Vera where the doctrine
was first fully discussed, if we act differently now. I do not think we are
prepared to take that step. Respondents, however, would hard back to the
American Supreme Court doctrine in Mellon v. Frothingham, with their claim
that what petitioners possess "is an interest which is shared in common by
other people and is comparatively so minute and indeterminate as to afford
any basis and assurance that the judicial process can act on it." That is to
speak in the language of a bygone era, even in the United States. For as
Chief Justice Warren clearly pointed out in the later case of Flast v. Cohen,
the barrier thus set up if not breached has definitely been lowered.

In Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. vs. Tan, 33 reiterated

in Basco vs. Philippine Amusements and Gaming Corporation,34 this Court stated:

Objections to taxpayers' suits for lack of sufficient personality standing or

interest are, however, in the main procedural matters. Considering the
importance to the public of the cases at bar, and in keeping with the Court's
duty, under the 1987 Constitution, to determine whether or not the other
branches of government have kept themselves within the limits of the
Constitution and the laws and that they have not abused the discretion given
 to them, this Court has brushed aside technicalities of procedure and has
taken cognizance of these petitions.

and in Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian
Reform,35 it declared:

With particular regard to the requirement of proper party as applied in the

cases before us, we hold that the same is satisfied by the petitioners and
intervenors because each of them has sustained or is in danger of
sustaining an immediate injury as a result of the acts or measures
complained of. [Ex ParteLevitt, 303 US 633]. And even if, strictly speaking,
they are not covered by the definition, it is still within the wide discretion of
the Court to waive the requirement and so remove the impediment to its
addressing and resolving the serious constitutional questions raised.

In the first Emergency Powers Cases, ordinary citizens and taxpayers were
allowed to question the constitutionality of several executive orders issued
by President Quirino although they were invoking only an indirect and
general interest shared in common with the public. The Court dismissed the
objective that they were not proper parties and ruled that the transcendental
importance to the public of these cases demands that they be settled
promptly and definitely, brushing aside, if we must, technicalities of
procedure. We have since then applied this exception in many other cases.
(Emphasis supplied)

In Daza vs. Singson, 36 this Court once more said:

. . . For another, we have early as in the Emergency Powers Cases that

where serious constitutional questions are involved, "the transcendental
importance to the public of these cases demands that they be settled
promptly and definitely, brushing aside, if we must, technicalities of
procedure." The same policy has since then been consistently followed by
the Court, as in Gonzales vs. Commission on Elections [21 SCRA 774] . . .
The Federal Supreme Court of the United States of America has also expressed its
discretionary power to liberalize the rule on locus standi. In United States vs. Federal
Power Commission and Virginia Rea Association vs. Federal Power Commission,37 it
held:

We hold that petitioners have standing. Differences of view, however,

preclude a single opinion of the Court as to both petitioners. It would not
further clarification of this complicated specialty of federal jurisdiction, the
solution of whose problems is in any event more or less determined by the
specific circumstances of individual situations, to set out the divergent
grounds in support of standing in these cases.

In line with the liberal policy of this Court on locus standi, ordinary taxpayers, members
of Congress, and even association of planters, and non-profit civic organizations were
allowed to initiate and prosecute actions before this Court to question the constitutionality
or validity of laws, acts, decisions, rulings, or orders of various government agencies or
instrumentalities. Among such cases were those assailing the constitutionality of (a) R.A.
No. 3836 insofar as it allows retirement gratuity and commutation of vacation and sick
leave to Senators and Representatives and to elective officials of both Houses of
Congress;38 (b) Executive Order No. 284, issued by President Corazon C. Aquino on 25
July 1987, which allowed members of the cabinet, their undersecretaries, and assistant
secretaries to hold other government offices or positions; 39 (c) the automatic
appropriation for debt service in the General Appropriations Act; 40 (d) R.A. No. 7056 on
the holding of desynchronized elections; 41 (d) R.A. No. 1869 (the charter of the Philippine
Amusement and Gaming Corporation) on the ground that it is contrary to morals, public
policy, and order; 42 and (f) R.A. No. 6975, establishing the Philippine National
Police. 43

Other cases where we have followed a liberal policy regarding locus standi include those
attacking the validity or legality of (a) an order allowing the importation of rice in the light
of the prohibition imposed by R.A. No. 3452; 44 (b) P.D. Nos. 991 and 1033 insofar as
they proposed amendments to the Constitution and P.D. No. 1031 insofar as it directed
the COMELEC to supervise, control, hold, and conduct the referendum-plebiscite on 16
October 1976; 45(c) the bidding for the sale of the 3,179 square meters of land at
Roppongi, Minato-ku, Tokyo, Japan; 46 (d) the approval without hearing by the Board of
Investments of the amended application of the Bataan Petrochemical Corporation to
transfer the site of its plant from Bataan to Batangas and the validity of such transfer and
the shift of feedstock from naphtha only to naphtha and/or liquefied petroleum gas; 47 (e)
the decisions, orders, rulings, and resolutions of the Executive Secretary, Secretary of
Finance, Commissioner of Internal Revenue, Commissioner of Customs, and the Fiscal
Incentives Review Board exempting the National Power Corporation from indirect tax and
duties; 48 (f) the orders of the Energy Regulatory Board of 5 and 6 December 1990 on the
ground that the hearings conducted on the second provisional increase in oil prices did
not allow the petitioner substantial cross-examination; 49 (g) Executive Order No. 478
which levied a special duty of P0.95 per liter or P151.05 per barrel of imported crude oil
and P1.00 per liter of imported oil products; 50 (h) resolutions of the Commission on
Elections concerning the apportionment, by district, of the number of elective members
of Sanggunians; 51 and (i) memorandum orders issued by a Mayor affecting the Chief of
Police of Pasay City.52

In the 1975 case of Aquino vs. Commission on Elections, 53 this Court, despite its
unequivocal ruling that the petitioners therein had no personality to file the petition,
resolved nevertheless to pass upon the issues raised because of the far-reaching
implications of the petition. We did no less in De Guia vs. COMELEC 54 where, although
we declared that De Guia "does not appear to have locus standi, a standing in law, a
personal or substantial interest," we brushed aside the procedural infirmity "considering
the importance of the issue involved, concerning as it does the political exercise of
qualified voters affected by the apportionment, and petitioner alleging abuse of discretion
and violation of the Constitution by respondent."

We find the instant petition to be of transcendental importance to the public. The issues
it raised are of paramount public interest and of a category even higher than those
involved in many of the aforecited cases. The ramifications of such issues immeasurably
affect the social, economic, and moral well-being of the people even in the remotest
barangays of the country and the counter-productive and retrogressive effects of the
envisioned on-line lottery system are as staggering as the billions in pesos it is expected
to raise. The legal standing then of the petitioners deserves recognition and, in the
exercise of its sound discretion, this Court hereby brushes aside the procedural barrier
which the respondents tried to take advantage of.

And now on the substantive issue.

Section 1 of R.A. No. 1169, as amending by B.P. Blg. 42, prohibits the PCSO from holding
and conducting lotteries "in collaboration, association or joint venture with any person,
association, company or entity, whether domestic or foreign." Section 1 provides:

Sec. 1. The Philippine Charity Sweepstakes Office. The Philippine

Charity Sweepstakes Office, hereinafter designated the Office, shall be the
principal government agency for raising and providing for funds for health
programs, medical assistance and services and charities of national
character, and as such shall have the general powers conferred in section
thirteen of Act Numbered One thousand four hundred fifty-nine, as
amended, and shall have the authority:

A. To hold and conduct charity sweepstakes races, lotteries

and other similar activities, in such frequency and manner, as
shall be determined, and subject to such rules and regulations
as shall be promulgated by the Board of Directors.

B. Subject to the approval of the Minister of Human

Settlements, to engage in health and welfare-related
investments, programs, projects and activities which may be
profit-oriented, by itself or in collaboration, association or joint
venture with any person, association, company or entity,
whether domestic or foreign, except for the activities
mentioned in the preceding paragraph (A), for the purpose of
providing for permanent and continuing sources of funds for
 health programs, including the expansion of existing ones,
medical assistance and services, and/or charitable grants:
Provided, That such investment will not compete with the
private sector in areas where investments are adequate as
may be determined by the National Economic and
Development Authority. (emphasis supplied)

The language of the section is indisputably clear that with respect to its franchise or
privilege "to hold and conduct charity sweepstakes races, lotteries and other similar
activities," the PCSO cannot exercise it "in collaboration, association or joint venture" with
any other party. This is the unequivocal meaning and import of the phrase "except for the
activities mentioned in the preceding paragraph (A)," namely, "charity sweepstakes races,
lotteries and other similar activities."

B.P. Blg. 42 originated from Parliamentary Bill No. 622, which was covered by Committee
Report No. 103 as reported out by the Committee on Socio-Economic Planning and
Development of the Interim Batasang Pambansa. The original text of paragraph B,
Section 1 of Parliamentary Bill No. 622 reads as follows:

To engage in any and all investments and related profit-oriented projects or

programs and activities by itself or in collaboration, association or joint
venture with any person, association, company or entity, whether domestic
or foreign, for the main purpose of raising funds for health and medical
assistance and services and charitable grants. 55

During the period of committee amendments, the Committee on Socio-Economic

Planning and Development, through Assemblyman Ronaldo B. Zamora, introduced an
amendment by substitution to the said paragraph B such that, as amended, it should read
as follows:

Subject to the approval of the Minister of Human Settlements, to engage in

health-oriented investments, programs, projects and activities which may
be profit- oriented, by itself or in collaboration, association, or joint venture
 with any person, association, company or entity, whether domestic or
foreign, for the purpose of providing for permanent and continuing sources
of funds for health programs, including the expansion of existing ones,
medical assistance and services and/or charitable grants. 56

Before the motion of Assemblyman Zamora for the approval of the amendment could be
acted upon, Assemblyman Davide introduced an amendment to the amendment:

MR. DAVIDE.

Mr. Speaker.

THE SPEAKER.

The gentleman from Cebu is recognized.

MR. DAVIDE.

May I introduce an amendment to the committee

amendment? The amendment would be to
insert after "foreign" in the amendment just read
the following: EXCEPT FOR THE ACTIVITY IN
LETTER (A) ABOVE.

When it is joint venture or in collaboration with

any entity such collaboration or joint venture
must not include activity activity letter (a) which
is the holding and conducting of sweepstakes
races, lotteries and other similar acts.

MR. ZAMORA.

We accept the amendment, Mr. Speaker.

MR. DAVIDE.
 Thank you, Mr. Speaker.

THE SPEAKER.

Is there any objection to the amendment?

(Silence) The amendment, as amended, is
approved. 57

Further amendments to paragraph B were introduced and approved. When Assemblyman

Zamora read the final text of paragraph B as further amended, the earlier approved
amendment of Assemblyman Davide became "EXCEPT FOR THE ACTIVITIES
MENTIONED IN PARAGRAPH (A)"; and by virtue of the amendment introduced by
Assemblyman Emmanuel Pelaez, the word PRECEDING was inserted before
PARAGRAPH. Assemblyman Pelaez introduced other amendments. Thereafter, the new
paragraph B was approved. 58

This is now paragraph B, Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42.

No interpretation of the said provision to relax or circumvent the prohibition can be allowed
since the privilege to hold or conduct charity sweepstakes races, lotteries, or other similar
activities is a franchise granted by the legislature to the PCSO. It is a settled rule that "in
all grants by the government to individuals or corporations of rights, privileges and
franchises, the words are to be taken most strongly against the grantee .... [o]ne who
claims a franchise or privilege in derogation of the common rights of the public must prove
his title thereto by a grant which is clearly and definitely expressed, and he cannot enlarge
it by equivocal or doubtful provisions or by probable inferences. Whatever is not
unequivocally granted is withheld. Nothing passes by mere implication." 59

In short then, by the exception explicitly made in paragraph B, Section 1 of its charter, the
PCSO cannot share its franchise with another by way of collaboration, association or joint
venture. Neither can it assign, transfer, or lease such franchise. It has been said that "the
rights and privileges conferred under a franchise may, without doubt, be assigned or
transferred when the grant is to the grantee and assigns, or is authorized by statute. On
the other hand, the right of transfer or assignment may be restricted by statute or the
constitution, or be made subject to the approval of the grantor or a governmental agency,
such as a public utilities commission, exception that an existing right of assignment
cannot be impaired by subsequent legislation." 60

It may also be pointed out that the franchise granted to the PCSO to hold and conduct
lotteries allows it to hold and conduct a species of gambling. It is settled that "a statute
which authorizes the carrying on of a gambling activity or business should be strictly
construed and every reasonable doubt so resolved as to limit the powers and rights
claimed under its authority." 61

Does the challenged Contract of Lease violate or contravene the exception in Section 1
of R.A. No. 1169, as amended by B.P. Blg. 42, which prohibits the PCSO from holding
and conducting lotteries "in collaboration, association or joint venture with" another?

We agree with the petitioners that it does, notwithstanding its denomination or designation
as a (Contract of Lease). We are neither convinced nor moved or fazed by the insistence
and forceful arguments of the PGMC that it does not because in reality it is only an
independent contractor for a piece of work, i.e., the building and maintenance of a lottery
system to be used by the PCSO in the operation of its lottery franchise. Whether the
contract in question is one of lease or whether the PGMC is merely an independent
contractor should not be decided on the basis of the title or designation of the contract
but by the intent of the parties, which may be gathered from the provisions of the contract
itself. Animus hominis est anima scripti. The intention of the party is the soul of the
instrument. In order to give life or effect to an instrument, it is essential to look to the
intention of the individual who executed it. 62 And, pursuant to Article 1371 of the Civil
Code, "to determine the intention of the contracting parties, their contemporaneous and
subsequent acts shall be principally considered." To put it more bluntly, no one should be
deceived by the title or designation of a contract.

A careful analysis and evaluation of the provisions of the contract and a consideration of
the contemporaneous acts of the PCSO and PGMC indubitably disclose that the contract
is not in reality a contract of lease under which the PGMC is merely an independent
contractor for a piece of work, but one where the statutorily
proscribed collaboration or association, in the least, or joint venture, at the most, exists
between the contracting parties. Collaboration is defined as the acts of working together
in a joint project. 63 Association means the act of a number of persons in uniting together
for some special purpose or business. 64 Joint venture is defined as an association of
persons or companies jointly undertaking some commercial enterprise; generally all
contribute assets and share risks. It requires a community of interest in the performance
of the subject matter, a right to direct and govern the policy in connection therewith, and
duty, which may be altered by agreement to share both in profit and
losses.65

The contemporaneous acts of the PCSO and the PGMC reveal that the PCSO had neither
funds of its own nor the expertise to operate and manage an on-line lottery system, and
that although it wished to have the system, it would have it "at no expense or risks to the
government." Because of these serious constraints and unwillingness to bear expenses
and assume risks, the PCSO was candid enough to state in its RFP that it is seeking for
"a suitable contractor which shall build, at its own expense, all the facilities needed to
operate and maintain" the system; exclusively bear "all capital, operating expenses and
expansion expenses and risks"; and submit "a comprehensive nationwide lottery
development plan . . . which will include the game, the marketing of the games, and the
logistics to introduce the game to all the cities and municipalities of the country within five
(5) years"; and that the operation of the on-line lottery system should be "at no expense
or risk to the government" meaning itself, since it is a government-owned and
controlled agency. The facilities referred to means "all capital equipment, computers,
terminals, software, nationwide telecommunications network, ticket sales offices,
furnishings and fixtures, printing costs, costs of salaries and wages, advertising and
promotions expenses, maintenance costs, expansion and replacement costs, security
and insurance, and all other related expenses needed to operate a nationwide on-line
lottery system."
In short, the only contribution the PCSO would have is its franchise or authority to operate
the on-line lottery system; with the rest, including the risks of the business, being borne
by the proponent or bidder. It could be for this reason that it warned that "the proponent
must be able to stand to the acid test of proving that it is an entity able to take on the role
of responsible maintainer of the on-line lottery system." The PCSO, however, makes it
clear in its RFP that the proponent can propose a period of the contract which shall not
exceed fifteen years, during which time it is assured of a "rental" which shall not exceed
12% of gross receipts. As admitted by the PGMC, upon learning of the PCSO's decision,
the Berjaya Group Berhad, with its affiliates, wanted to offer its services and resources to
the PCSO. Forthwith, it organized the PGMC as "a medium through which the technical
and management services required for the project would be offered and delivered to
PCSO." 66

Undoubtedly, then, the Berjaya Group Berhad knew all along that in connection with an
on-line lottery system, the PCSO had nothing but its franchise, which it solemnly
guaranteed it had in the General Information of the RFP. 67Howsoever viewed then, from
the very inception, the PCSO and the PGMC mutually understood that any arrangement
between them would necessarily leave to the PGMC the technical, operations, and
managementaspects of the on-line lottery system while the PCSO would, primarily,
provide the franchise. The words Gaming andManagement in the corporate name of
respondent Philippine Gaming Management Corporation could not have been conceived
just for euphemistic purposes. Of course, the RFP cannot substitute for the Contract of
Lease which was subsequently executed by the PCSO and the PGMC. Nevertheless, the
Contract of Lease incorporates their intention and understanding.

The so-called Contract of Lease is not, therefore, what it purports to be. Its denomination
as such is a crafty device, carefully conceived, to provide a built-in defense in the event
that the agreement is questioned as violative of the exception in Section 1 (B) of the
PCSO's charter. The acuity or skill of its draftsmen to accomplish that purpose easily
manifests itself in the Contract of Lease. It is outstanding for its careful and meticulous
drafting designed to give an immediate impression that it is a contract of lease. Yet, woven
therein are provisions which negate its title and betray the true intention of the parties to
be in or to have a joint venture for a period of eight years in the operation and
maintenance of the on-line lottery system.

Consistent with the above observations on the RFP, the PCSO has only its franchise to
offer, while the PGMC represents and warrants that it has access to all managerial and
technical expertise to promptly and effectively carry out the terms of the contract. And, for
a period of eight years, the PGMC is under obligation to keep all the Facilitiesin safe
condition and if necessary, upgrade, replace, and improve them from time to time as new
technology develops to make the on-line lottery system more cost-effective and
competitive; exclusively bear all costs and expenses relating to the printing, manpower,
salaries and wages, advertising and promotion, maintenance, expansion and
replacement, security and insurance, and all other related expenses needed to operate
the on-line lottery system; undertake a positive advertising and promotions campaign for
both institutional and product lines without engaging in negative advertising against other
lessors; bear the salaries and related costs of skilled and qualified personnel
for administrative and technical operations; comply with procedural and coordinating
rulesissued by the PCSO; and to train PCSO and other local personnel and to effect the
transfer of technology and other expertise, such that at the end of the term of the contract,
the PCSO will be able to effectively take over the Facilities and efficiently operate the on-
line lottery system. The latter simply means that, indeed, the managers, technicians or
employees who shall operate the on-line lottery system are not managers, technicians or
employees of the PCSO, but of the PGMC and that it is only after the expiration of the
contract that the PCSO will operate the system. After eight years, the PCSO would
automatically become the owner of the Facilities without any other further consideration.

For these reasons, too, the PGMC has the initial prerogative to prepare the detailed plan
of all games and the marketing thereof, and determine the number of players, value of
winnings, and the logistics required to introduce the games, including the Master Games
Plan. Of course, the PCSO has the reserved authority to disapprove them. 68 And, while
the PCSO has the sole responsibility over the appointment of dealers and retailers
throughout the country, the PGMC may, nevertheless, recommend for appointment
dealers and retailers which shall be acted upon by the PCSO within forty-eight hours and
collect and retain, for its own account, a security deposit from dealers and retailers in
respect of equipment supplied by it.

This joint venture is further established by the following:

(a) Rent is defined in the lease contract as the amount to be paid to the PGMC as
compensation for the fulfillment of its obligations under the contract, including, but not
limited to the lease of the Facilities. However, this rent is not actually a fixed amount.
Although it is stated to be 4.9% of gross receipts from ticket sales, payable net of taxes
required by law to be withheld, it may be drastically reduced or, in extreme cases, nothing
may be due or demandable at all because the PGMC binds itself to "bear all risks if the
revenue from the ticket sales, on an annualized basis, are insufficient to pay the entire
prize money." This risk-bearing provision is unusual in a lessor-lessee relationship, but
inherent in a joint venture.

(b) In the event of pre-termination of the contract by the PCSO, or its suspension of
operation of the on-line lottery system in breach of the contract and through no fault of
the PGMC, the PCSO binds itself "to promptly, and in any event not later than sixty (60)
days, reimburse the Lessor the amount of its total investment cost associated with the
On-Line Lottery System, including but not limited to the cost of the Facilities, and further
compensate the LESSOR for loss of expected net profit after tax, computed over the
unexpired term of the lease." If the contract were indeed one of lease, the payment of the
expected profits or rentals for the unexpired portion of the term of the contract would be
enough.

(c) The PGMC cannot "directly or indirectly undertake any activity or business in
competition with or adverse to the On-Line Lottery System of PCSO unless it obtains the
latter's prior written consent." If the PGMC is engaged in the business of leasing
equipment and technology for an on-line lottery system, we fail to see any acceptable
reason why it should allow a restriction on the pursuit of such business.

(d) The PGMC shall provide the PCSO the audited Annual Report sent to its stockholders,
and within two years from the effectivity of the contract, cause itself to be listed in the local
stock exchange and offer at least 25% of its equity to the public. If the PGMC is merely a
lessor, this imposition is unreasonable and whimsical, and could only be tied up to the
fact that the PGMC will actually operate and manage the system; hence, increasing public
participation in the corporation would enhance public interest.

(e) The PGMC shall put up an Escrow Deposit of P300,000,000.00 pursuant to the
requirements of the RFP, which it may, at its option, maintain as its initial performance
bond required to ensure its faithful compliance with the terms of the contract.

(f) The PCSO shall designate the necessary personnel to monitor and audit the daily
performance of the on-line lottery system; and promulgate procedural and coordinating
rules governing all activities relating to the on-line lottery system. The first further confirms
that it is the PGMC which will operate the system and the PCSO may, for the protection
of its interest, monitor and audit the daily performance of the system. The second admits
the coordinating and cooperative powers and functions of the parties.

(g) The PCSO may validly terminate the contract if the PGMC becomes insolvent or
bankrupt or is unable to pay its debts, or if it stops or suspends or threatens to stop or
suspend payment of all or a material part of its debts.

All of the foregoing unmistakably confirm the indispensable role of the PGMC in the
pursuit, operation, conduct, and management of the On-Line Lottery System. They exhibit
and demonstrate the parties' indivisible community of interest in the conception, birth and
growth of the on-line lottery, and, above all, in its profits, with each having a right in the
formulation and implementation of policies related to the business and sharing, as well,
in the losses with the PGMC bearing the greatest burden because of its assumption of
expenses and risks, and the PCSO the least, because of its confessed unwillingness to
bear expenses and risks. In a manner of speaking, each is wed to the other for better or
for worse. In the final analysis, however, in the light of the PCSO's RFP and the above
highlighted provisions, as well as the "Hold Harmless Clause" of the Contract of Lease, it
is even safe to conclude that the actual lessor in this case is the PCSO and the subject
matter thereof is its franchise to hold and conduct lotteries since it is, in reality, the PGMC
which operates and manages the on-line lottery system for a period of eight years.

We thus declare that the challenged Contract of Lease violates the exception provided
for in paragraph B, Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42, and is,
therefore, invalid for being contrary to law. This conclusion renders unnecessary further
discussion on the other issues raised by the petitioners.

WHEREFORE, the instant petition is hereby GRANTED and the challenged Contract of
Lease executed on 17 December 1993 by respondent Philippine Charity Sweepstakes
Office (PCSO) and respondent Philippine Gaming Management Corporation (PGMC) is
hereby DECLARED contrary to law and invalid.

The Temporary Restraining Order issued on 11 April 1994 is hereby MADE

PERMANENT.

No pronouncement as to costs.

SO ORDERED.

Regalado, Romero and Bellosillo, JJ., concur.

Narvasa, C.J., took no part.

Separate Opinions

CRUZ, J., concurring:

I am happy to join Mr. Justice Hilario G. Davide, Jr. in his excellent ponencia. I will add
the following personal observations only for emphasis as it is not necessary to
supplement his thorough exposition.

The respondents take great pains to cite specific provisions of the contract to show that
it is PCSO that is actually operating the on-line lottery, but they have not succeeded in
disproving the obvious, to wit, that the document was intentionally so crafted to make it
appear that the operation is not a joint undertaking of PCSO and PGMC but a mere lease
of services. It is a clever instrument, to be sure, but we are, gratifyingly, not deluded.
Lawyers have a special talent to disguise the real intention of the parties in a contract to
make it come ostensibly within the provisions of a law although the real if furtive purpose
is to violate it. That talent has been exercised in this case, but not convincingly enough.

It should be quite clear, from the adroit way the contract has been drafted, that the primary
objective was to avoid the conclusion that PCSO will be operating a lottery "in association,
collaboration or joint venture with any person, association, company or entity," which is
prohibited by Section 1 of Rep. Act No. 1169 as amended by B.P. Blg. 42. Citing the self-
serving provisions of the contract, the respondents would have us believe that the
contract is perfectly lawful because all it does is provide for the lease to PCSO of the
technical know-how and equipment of PGMC, with PCSO acting as "the sole and
individual operator" of the lottery. I am glad we are not succumbing to this sophistry.

Despite the artfulness of the contract (authorship of which was pointedly denied by both
counsel for the government and the private respondent during the oral argument on this
case), a careful study will reveal telling stipulations that it is PGMC and not PCSO that
will actually be operating the lottery. Thus, it is provided inter alia that PGMC shall furnish
all capital equipment and other facilities needed for the operation; bear all expenses
relating to the operation, including those for the salaries and wages of the administrative
and technical personnel; undertake a positive advertising and promotion campaign for
public support of the lottery; establish a radio communications network throughout the
country as part of the operation; and assume all risks if the revenues from ticket sales are
insufficient to pay the entire prize money. Most significantly, to show that it is only after
eight years from the effectivity of the contract that PCSO will actually operate the lottery,
Par. 6.7 of the agreement provides that PGMC shall:

6.7. Upon effectivity of this Contract, commence the training of PCSO and
other local personnel and the transfer of technology and expertise, such
that at the end of the term of this Contract, PCSO will be able to effectively
take-over the Facilities and efficiently operate the On-Line Lottery System.
(Emphasis supplied).

In the meantime, that is to say during the entire 8-year term of the contract, it will be
PGMC that will be operating the lottery. Only "at the end of the term of this Contract" will
PCSO "be able to effectively take-over the Facilities and efficiently operate the On-Line
Lottery System."

Even on the assumption that it is PCSO that will be operating the lottery at the very start,
the authority granted to PGMC by the agreement will readily show that PCSO will not be
acting alone, as the respondents pretend. In fact, it cannot. PGMC is an indispensable
co-worker because it has the equipment and the technology and the management skills
that PCSO does not have at this time for the operation of the lottery, PCSO cannot deny
that it needs the assistance of PGMC for this purpose, which was its reason for entering
into the contract in the first place.

And when PCSO does avail itself of such assistance, how will it be operating the lottery?
Undoubtedly, it will be doing so "in collaboration, association or joint venture" with PGMC,
which, let it be added, will not be serving as a mere "hired help" of PCSO subject to its
control. PGMC will be functioning independently in the discharge of its own assigned role
as stipulated in detail under the contract. PGMC is plainly a partner of PCSO in violation
of law, no matter how PGMC's assistance is called or the contract is denominated.

Even if it be conceded that the assistance partakes of a lease of services, the undeniable
fact is that PCSO would still be collaborating or cooperating with PGMC in the operation
of the lottery. What is even worse is that PCSO and PGMC may be actually engaged in
a joint venture, considering that PGMC does not collect the usual fixed rentals due an
ordinary lessor but is entitled to a special "Rental Fee," as the contract calls it, "equal to
four point nine percent (4.9%) of gross receipts from ticket sales."

The flexibility of this amount is significant. As may be expected, it will induce in PGMC an
active interest and participation in the success of PCSO that is not expected of an ordinary
detached lessor who gets to be paid his rentals not a rental fee whether the lessee's
business prospers or not. PGMC's share in the operation depends on its own
performance and the effectiveness of its collaboration with PCSO. Although the contract
pretends otherwise, PGMC is a co-investor with PCSO in what is practically, if not in a
strictly legal sense, a joint venture.

Concerning the doctrine of locus standi, I cannot agree that out of the sixty million Filipinos
affected by the proposed lottery, not a single solitary citizen can question the
agreement. Locus standi is not such an absolute rule that it cannot admit of exceptions
under certain conditions or circumstances like those attending this transaction. As I
remarked in my dissent in Guazon v. De Villa, 181 SCRA 623, "It is not only the owner of
the burning house who has the right to call the firemen. Every one has the right
and responsibility to prevent the fire from spreading even if he lives in the other block."

What is especially galling is that the transaction in question would foist upon our people
an essentially immoral activity through the instrumentality of a foreign corporation, which
naturally does not have the same concern for our interests as we ourselves have. I am
distressed that foreigners should be allowed to exploit the weakness of some of us for
instant gain without work, and with the active collaboration and encouragement of our
own government at that.

Feliciano, J., concurring

I agree with the conclusions reached by my distinguished brother in the Court Davide, Jr.,
J., both in respect of the question of locus standi and in respect of the merits of this case,
that is, the issues of legality and constitutionality of the Contract of Lease entered into
between the Philippine Charity Sweepstakes Office (PCSO) and the Philippine Gaming
Management Corporation (PGMC).
In this separate opinion, I propose to address only the question of locus standi. It is with
some hesitation that I do so, considering the extensive separate opinions on this question
written by my learned brothers Melo, Puno and Vitug, JJ. I agree with the great deal of
what my brothers Melo, Puno and Vitug say about locus standi in their separate opinions
and there is no need to go over the ground that I share with them. Because, however, I
reach a different conclusion in respect of the presence or absence of locus standi on the
part of the petitioners in the case before the Court, there is an internal need (a need
internal to myself) to articulate the considerations which led me to that conclusion.

There is no dispute that the doctrine of locus standi reflects an important constitutional
principle, that is, the principle of separation of powers which, among other things,
mandates that each of the great Departments of government is responsible for
performance of its constitutionally allotted tasks. Insofar as the Judicial Department is
concerned, the exercise of judicial power and carrying out of judicial functions commonly
take place within the context of actual cases or controversies. This, in turn, reflects the
basic notion of judicial power as the power to resolve actual disputes and of the traditional
business of courts as the hearing and deciding of specific controversies brought before
them. In our own jurisdiction, and at least since the turn of the present century, judicial
power has always included the power of judicial review, understood as the authority of
courts (more specifically the Supreme Court) to assay contested legislative and executive
acts in terms of their constitutionality or legality. Thus, the general proposition has been
that a petitioner who assails the legal or constitutional quality of an executive or legislative
act must be able to show that he has locus standi. Otherwise, the petition becomes
vulnerable to prompt dismissal by the court.

There is, upon the other hand, little substantive dispute that the possession of locus
standi 1 is not, in each and every case, a rigid and absolute requirement for access to the
courts. Certainly that is the case where great issues of public law are at stake, issues
which cannot be approached in the same way that a court approaches a suit for the
collection of a sum of money or a complaint for the recovery of possession of a particular
piece of land. The broad question is when, or in what types of cases, the court should
insist on a clear showing of locus standiunderstood as a direct and personal interest in
the subject matter of the case at bar, and when the court may or should relax that
apparently stringent requirement and proceed to deal with the legal or constitutional
issues at stake in a particular case.

I submit, with respect, that it is not enough for the Court simply to invoke "public interest"
or even "paramount considerations of national interest," and to say that the specific
requirements of such public interest can only be ascertained on a "case to case" basis.
For one thing, such an approach is not intellectually satisfying. For another, such an
answer appears to come too close to saying that locus standi exists whenever at least a
majority of the Members of this Court participating in a case feel that an appropriate case
for judicial intervention has arisen.

This is not, however, to say that there is somewhere an over-arching juridical principle or
theory, waiting to be discovered, that permits a ready answer to the question of when, or
in what types of cases, the need to show locus standi may be relaxed in greater or lesser
degree. To my knowledge, no satisfactory principle or theory has been discovered and
none has been crafted, whether in our jurisdiction or in the United States. 2 I have neither
the competence nor the opportunity to try to craft such principle or formula. It might,
however, be useful to attempt to indicate the considerations of principle which, in the
present case, appear to me to require an affirmative answer to the question of whether
or not petitioners are properly regarded as imbued with the standing necessary to bring
and maintain the present petition.

Firstly, the character of the funds or other assets involved in the case is of major
importance. In the case presently before the Court, the funds involved are clearly public
in nature. The funds to be generated by the proposed lottery are to be raised from the
population at large. Should the proposed operation be as successful as its proponents
project, those funds will come from well-nigh every town and barrio of Luzon. The funds
here involved are public in another very real sense: they will belong to the PCSO, a
government owned or controlled corporation and an instrumentality of the government
and are destined for utilization in social development projects which, at least in principle,
are designed to benefit the general public. My learned brothers Melo, Puno and Vitug, JJ.
concede that taxpayers' suits have been recognized as an exception to the traditional
requirement of recognized as an exception to the traditional requirement of locus standi.
They insist, however, that because the funds here involved will not have been generated
by the exercise of the taxing power of the Government, the present petition cannot be
regarded as a taxpayer's suit and therefore, must be dismissed by the Court. It is my
respectful submission that that constitutes much too narrow a conception of the taxpayer's
suit and of the public policy that it embodies. It is also to overlook the fact that tax monies,
strictly so called, constitute only one (1) of the major categories of funds today raised and
used for public purposes. It is widely known that the principal sources of funding for
government operations today include, not just taxes and customs duties, but also
revenues derived from activities of the Philippine Amusement Gaming Corporation
(PAGCOR), as well as the proceeds of privatization of government owned or controlled
corporations and other government owned assets. The interest of a private citizen in
seeing to it that public funds, from whatever source they may have been derived, go only
to the uses directed and permitted by law is as real and personal and substantial as the
interest of a private taxpayer in seeing to it that tax monies are not intercepted on their
way to the public treasury or otherwise diverted from uses prescribed or allowed by law.
It is also pertinent to note that the more successful the government is in raising revenues
by non-traditional methods such as PAGCOR operations and privatization measures, the
lesser will be the pressure upon the traditional sources of public revenues, i.e., the pocket
books of individual taxpayers and importers.

A second factor of high relevance is the presence of a clear case of disregard of a

constitutional or statutory prohibition by the public respondent agency or instrumentality
of the government. A showing that a constitutional or legal provision is patently being
disregarded by the agency or instrumentality whose act is being assailed, can scarcely
be disregarded by court. The concept of locus standi which is part and parcel of the
broader notion of ripeness of the case "does not operate independently and is not
alone decisive. . . . [I]t is in substantial part a function of a judge's estimate of the merits
of the constitutional [or legal] issue." 3 The notion of locus standi and the judge's
conclusions about the merits of the case, in other words, interact with each other. Where
the Court perceives a serious issue of violation of some constitutional or statutory
limitation, it will be much less difficult for the Court to find locus standi in the petitioner
and to confront the legal or constitutional issue. In the present case, the majority of the
Court considers that a very substantial showing has been made that the Contract of Lease
between the PCSO and the PGMC flies in the face of legal limitations.

A third consideration of importance in the present case is the lack of any other party with
a more direct and specific interest in raising the questions here being raised. Though a
public bidding was held, no losing or dissatisfied bidder has come before the Court. The
Office of the Ombudsman has not, to the knowledge of the Court, raised questions about
the legality or constitutionality of the Contract of Lease here involved. The National
Government itself, through the Office of the Solicitor General, is defending the PCSO
Contract (though it had not participated in the drafting thereof). In a situation like that here
obtaining, the submission may be made that the institution, so well known in corporation
law and practice, of the corporate stockholders' derivative suit furnishes an appropriate
analogy and that on the basis of such an analogy, a taxpayer's derivative suit should be
recognized as available.

The wide range of impact of the Contract of Lease here assailed and of its
implementation, constitutes still another consideration of significance. In the case at bar,
the agreement if implemented will be practically nationwide in its scope and reach (the
PCSO-PGMC Contract is limited in its application to the Island of Luzon; but if the PCSO
Contracts with the other two [2] private "gaming management" corporations in respect of
the Visayas and Mindanao are substantially similar to PCSO's Contract with PGMC, then
the Contract before us may be said to be national indeed in its implications and
consequences). Necessarily, the amounts of money expected to be raised by the
proposed activities of the PCSO and PGMC will be very substantial, probably in the
hundreds of millions of pesos. It is not easy to conceive of a contract with greater and
more far-reaching consequences, literally speaking, for the country than the Contract of
Lease here involved. Thus, the subject matter of the petition is not something that the
Court may casually pass over as unimportant and as not warranting the expenditure of
significant judicial resources.
In the examination of the various features of this case, the above considerations have
appeared to me to be important and as pressing for acceptance and exercise of
jurisdiction on the part of this Court. It is with these considerations in mind that I vote to
grant due course to the Petition and to hold that the Contract of Lease between the PCSO
and PGMC in its present form and content, and given the present state of the law, is
fatally defective.

PADILLA, J., concurring:

My views against gambling are a matter of judicial record. In Basco v. PAGCOR, (G.R.
No. 91649, 14 May 1991, 197 SCRA 52) I expressed these views in a separate opinion
where I was joined by that outstanding lady jurist, Mme. Justice A. Melencio-Herrera
whose incisive approach to legal problems is today missed in this Court. I reproduce here
those views because they are highly persuasive to the conclusions I reach in the present
controversy:

I concur in the result of the learned decision penned by my brother Mr.

Justice Paras. This means that I agree with the decision insofar as it holds
that the prohibition, control, and regulation of the entire activity known as
gambling properly pertain to "state policy." It is, therefore, the political
departments of government, namely, the legislative and the executive that
should decide on what government should do in the entire area of gambling,
and assume full responsibility to the people for such policy.

The courts, as the decision states, cannot inquire into the wisdom, morality
or expediency of policies adopted by the political departments of
government in areas which fall within their authority, except only when such
policies pose a clear and present danger to the life, liberty or property of the
individual. This case does not involve such a factual situation.

However, I hasten to make of record that I do not subscribe to gambling in

any form. It demeans the human personality, destroys self-confidence and
eviscerates one's self-respect, which in the long run will corrode whatever
 is left of the Filipino moral character. Gambling has wrecked and will
continue to wreck families and homes; it is an antithesis to individual
reliance and reliability as well as personal industry which are the
touchstones of real economic progress and national development.

Gambling is reprehensible whether maintained by government or privatized.

The revenues realized by the government out of "legalized" gambling will,
in the long run, be more than offset and negated by the irreparable damage
to the people's moral values.

Also, the moral standing of the government in its repeated avowals against
"illegal gambling" is fatally flawed and becomes untenable when it itself
engages in the very activity it seeks to eradicate.

One can go through the Court's decision today and mentally replace the
activity referred to therein as gambling, which is legal only because it is
authorized by law and run by the government, with the activity known
as prostitution. Would prostitution be any less reprehensible were it to be
authorized by law, franchised, and "regulated" by the government, in return
for the substantial revenues it would yield the government to carry out its
laudable projects, such as infrastructure and social amelioration? The
question, I believe, answers itself. I submit that the sooner the legislative
department outlaws all forms of gambling, as a fundamental state policy,
and the sooner the executive implements such policy, the better it will be
for the nation.

We presently have the sweepstakes lotteries; we already have the PAGCOR's gambling
casinos; the Filipino people will soon, if plans do not miscarry, be initiated into an even
more sophisticated and encompassing nationwide gambling network known as the "on-
line hi-tech lotto system." To be sure, it is not wealth producing; it is not export oriented.
It will draw from existing wealth in the hands of Filipinos and transfer it into the coffers of
the PCSO and its foreign partners at a price of further debasement of the moral standards
of the Filipino people, the bulk of whom are barely subsisting below the poverty line.

1. It is said that petitioners 1 have no locus standi to bring this suit even as
they challenge the legality and constitutionality of a contract of lease
between the PCSO, a government-owned corporation and the PGMC, a
private corporation with substantial (if not controlling) foreign composition
and content. Such contract of lease contains the terms and conditions under
which an "on-line hi-tech lotto system" will operate in the country.

As the ponente of the extended, unsigned en banc resolution in Valmonte v. PCSO,

(G.R. No. 78716 and G.R. No. 79084, 22 September 1987), I would be the last to
downgrade the rule, therein reiterated, that in order to maintain a suit challenging the
constitutionality and/or legality of a statute, order or regulation or assailing a particular
governmental action as done with grave abuse of discretion or with lack of jurisdiction,
the petitioner must show that he has a clear personal or legal right that would be violated
with the enforcement of the challenged statute, order or regulation or the implementation
of the questioned governmental action. But, in my considered view, this rule maybe (and
should be) relaxed when the issue involved or raised in the petition is of such paramount
national interest and importance as to dwarf the above procedural rule into a barren
technicality. As a unanimous Court en banc aptly put it in De Guia vs. COMELEC, G.R.
No. 104712, 6 May 1992, 208 SCRA 420.

Before addressing the crux of the controversy, the Court observes that
petitioner does not allege that he is running for re-election, much less, that
he is prejudiced by the election, by district, in Paraaque. As such, he does
not appear to have locus standi, a standing in law, a personal or substantial
interest. (Sanidad vs. COMELEC, G.R. No. L-4640, October 12, 1976. 73
SCRA 333; Municipality of Malabang vs. Benito, G.R. No. L-28113, March
28, 1969, 27 SCRA 533) He does not also allege any legal right that has
been violated by respondent. If for this alone, petitioner does not appear to
have any cause of action.
 However, considering the importance of the issue involved, concerning as
it does the political exercise of qualified voters affected by the
apportionment, and petitioner alleging abuse of discretion and violation of
the Constitution by respondent, We resolved to brush aside the question of
procedural infirmity, even as We perceive the petition to be one of
declaratory relief. We so held similarly through Mr. Justice Edgardo L. Paras
in Osmea vs. Commission on Elections.

I view the present case as falling within the De Guia case doctrine. For, when the contract
of lease in question seeks to establish and operate a nationwide gambling network with
substantial if not controlling foreign participation, then the issue is of paramount national
interest and importance as to justify and warrant a relaxation of the above-mentioned
procedural rule on locus standi.

2. The charter of the PCSO Republic Act No. 1169 as amended by BP

No. 42 insofar as relevant, reads:

Sec. 1. The Philippine Charity Sweepstakes Office. The Philippine

Charity Sweepstakes Office, hereinafter designated the Office, shall be the
principal government agency for raising and providing for funds for health
programs, medical assistance and services and charities of national
character, and as such shall have the general powers conferred in section
thirteen of Act Numbered One Thousand Four Hundred Fifty-Nine, as
amended, and shall have the authority:

A. To hold and conduct charity sweepstakes races, lotteries and other

similar activities, in such frequency and manner, as shall be determined,
and subject to such rules and regulations as shall be promulgated by the
Board of Directors.

B. Subject to the approval of the Minister of Human Settlements, to engage

in health and welfare-related investments, programs, projects and activities
which may be profit-oriented, by itself or in collaboration, association or joint
 venture with any person, association, company or entity, whether domestic
or foreign, except for the activities mentioned in the preceding paragraph
(A), for the purpose of providing for permanent and continuing sources of
funds for health programs, including the expansion of existing ones, medical
assistance and services, and/or charitable grants: Provided, That such
investments will not compete with the private sector in areas where
investments are adequate as may be determined by the National Economic
and Development Authority.

It is at once clear from the foregoing legal provisions that, while the PCSO charter allows
the PCSO to itself engage in lotteries, it does not however permit the PCSO to undertake
or engage in lotteries in "collaboration, association or joint venture" with others. The
palpable reason for this prohibition is, that PCSO should not and cannot be made a
vehicle for an otherwise prohibited foreign or domestic entity to engage in lotteries
(gambling activities) in the Philippines.

The core question then is whether the lease contract between PCSO and PGMC is a
device whereby PCSO will engage in lottery in collaboration, association or joint venture
with another, i.e. PGMC. I need not go here into the details and different specific features
of the contract to show that it is a joint venture between PCSO and PGMC. That has been
taken care of in the opinion of Mr. Justice Davide to which I fully subscribe.

On a slightly different plane and, perhaps simplified, I consider the agreement or

arrangement between the PCSO and PGMC a joint venture because each party to the
contract contributes its share in the enterprise or project. PGMC contributes its facilities,
equipment and know-how (expertise). PCSO contributes (aside from its charter) the
market, directly or through dealers and this to me is most important in the totality or
mass of the Filipinogambling elements who will invest in lotto tickets. PGMC will get its
4.9% of gross receipts (with assumption of certain risks in the course of lotto operations);
the residue of the whole exercise will go to PCSO. To any person with a minimum of
business know-how, this is a joint venture between PCSO and PGMC, plain and simple.
But assuming ex gratia argumenti that such arrangement between PCSO and PGMC is
not a joint venture between the two of them to install and operate an "on-line hi-tech lotto
system" in the country, it can hardly be denied that it is, at the very least, an association
or collaboration between PCSO and PGMC. For one cannot do without the other in the
installation, operation and, most importantly, marketing of the entire enterprise or project
in this country.

Indeed, the contract of lease in question is a clear violation of Republic Act No. 1169 as
amended by BP No. 42 (the PCSO charter).

Having arrived at the conclusion that the contract of lease in question between the PCSO
and PGMC is illegal and, therefore, invalid, I find it unnecessary to dwell on the other
issues raised in the pleadings and arguments of the parties.

I, therefore, vote to give DUE COURSE to the petition and to declare the contract of lease
in question between PCSO and PGMC, for the reasons aforestated, of no force and effect.

MELO, J., dissenting:

I submit that the petition before the Court deserves no less than outright dismissal for the
reason that petitioners, as concerned citizens and as taxpayers and as members of
Congress, do not possess the necessary legal standing to assail the validity of the
contract of lease entered into by the Philippine Charity Sweepstakes Office and the
Philippine Gaming Management Corporation relative to the establishment and operation
of an "On-line Hi-Tech Lottery System" in the country.

As announced in Lamb vs. Phipps (22 Phil. [1912], 559), "[J]udicial power in its nature, is
the power to hear and decide causes pending between parties who have the right to
sue and be sued in the courts of law and equity." Necessarily, this implies that a party
must show a personal stake in the outcome of the controversy or an injury to himself that
can be addressed by a favorable decision so as to warrant his invocation of the court's
jurisdiction and to justify the court's remedial powers in his behalf (Warth vs. Seldin, 422
U.S. 490; Guzman vs. Marrero, 180 U.S. 81; McMicken vs. United States, 97 U.S. 204).
Here, we have yet to see any of petitioners acquiring a personal stake in the outcome of
the controversy or being placed in a situation whereby injury may be sustained if the
contract of lease in question is implemented. It may be that the contract has somehow
evoked public interest which petitioners claim to represent. But the alleged public interest
which they pretend to represent is not only broad and encompassing but also strikingly
and veritably indeterminate that one cannot truly say whether a handful of the public, like
herein petitioners, may lay a valid claim of representation in behalf of the millions of
citizens spread all over the land who may have just as many varied reactions relative to
the contract in question.

Any effort to infuse personality on petitioners by considering the present case as a

"taxpayer's suit" could not cure the lack of locus standi on the part of petitioners. As
understood in this jurisdiction, a "taxpayer's suit" refers to a case where the act
complained of directly involves the illegal disbursement of public funds derived from
taxation (Pascual vs. Secretary of Public Works, 110 Phil. [1960] 331; Maceda vs.
Macaraig, 197 SCRA [1991]; Lozada vs. COMELEC, 120 SCRA [1983] 337; Dumlao vs.
COMELEC, 95 SCRA [1980] 392; Gonzales vs. Marcos, 65 SCRA [1975] 624). It cannot
be overstressed that no public fund raised by taxation is involved in this case. In fact, it is
even doubtful if the rentals which the PCSO will pay to the lessor for its operation of the
lottery system may be regarded as "public fund". The PCSO is not a revenue- collecting
arm of the government. Income or money realized by it from its operations will not and
need not be turned over to the National Treasury. Rather, this will constitute corporate
funds which will remain with the corporation to finance its various activities as authorized
in its charter. And if ever some semblance of "public character" may be said to attach to
its earnings, it is simply because PCSO is a government-owned or controlled entity and
not a purely private enterprise.

It must be conceded though that a "taxpayer's suit" had been allowed in a number of
instances in this jurisdiction. For sure, after the trial was blazed by Pascual vs. Secretary
of Public Works, supra, several more followed. It is to be noted, however, that in those
occasions where this Court allowed such a suit, the case invariably involved either the
constitutionality of a statute or the legality of the disbursement of public funds through the
enforcement of what was perceived to be an invalid or unconstitutional statute or
legislation (Pascual, supra; Philippine Constitution Association, Inc. vs. Jimenez, 15
SCRA [1965] 479; Philippine Constitution Association, Inc. vs. Mathay, 18 SCRA [1966]
300; Tolentino vs. COMELEC, 41 SCRA [1971] 702; Pelaez vs. Auditor General, 15
SCRA [1965] 569; Iloilo Palay and Corn Planters Association vs. Feliciano, 13 SCRA
[1965] 377).

The case before us is not a challenge to the validity of a statute or an attempt to restrain
expenditure of public funds pursuant to an alleged invalid congressional enactment. What
petitioners ask us to do is to nullify a simple contract of lease entered into by a
government-owned corporation with a private entity. That contract, as earlier pointed out,
does not involve the disbursement of public funds but of strictly corporate money. If every
taxpayer, claiming to have interest in the contract, no matter how remote, could come to
this Court and seek nullification of said contract, the day may come when the activities of
government corporate entities will ground to a standstill on account of nuisance suits filed
against them by persons whose supposed interest in the contract is as remote and as
obscure as the interest of any man in the street. The dangers attendant thereto are not
hard to discern and this Court must not allow them to come to pass.

One final observation must be emphasized. When the petition at bench was filed, the
Court decided to hear the case on oral argument on the initial perception that a
constitutional issue could be involved. However, it now appears that no question of
constitutional dimension is at stake as indeed the majority barely touches on such an
issue, concentrating as it does on its interpretation of the contract between the Philippine
Charity Sweepstakes Office and the Philippine Gaming Management Corporation.

I, therefore, vote to dismiss the petition.

PUNO, J., dissenting:

At the outset, let me state that my religious faith and family upbringing compel me to
regard gambling, regardless of its garb, with hostile eyes. Such antagonism tempts me to
view the case at bench as a struggle between good and evil, a fight between the forces
of light against the forces of darkness. I will not, however, yield to that temptation for we
are not judges of the Old Testament type who were not only arbiters of law but were also
high priests of morality.

I will therefore strictly confine the peregrinations of my mind to the legal issues for
resolution: (1) whether or not the petitioners have the Locus standi to file the petition at
bench; and (2) assuming their locus standi, whether or not the Contract of Lease between
PCSO and PGMC is null and void considering: (a) section 1 of R.A. No. 1169, as
amended by B.P. Blg. 42 (Charter of PCSO) which prohibits PCSO from holding and
conducting lotteries "in collaboration, association or joint venture with any person,
association, company or entity"; (b) Act No. 3836 which requires a congressional
franchise before any person or entity can establish and operate a telecommunication
system; (c) section 11, Art. XII of the Constitution, which requires that for a corporation to
operate a public utility, at least 60% of its capital must be owned by Filipino citizens; and
(d) R.A. No. 7042, otherwise known as the "Foreign Investments Act", which includes all
forms of gambling in its "negative list."

While the legal issues abound, I deferentially submit that the threshold issue is the locus
standi, or standing to sue, of petitioners. The petition describes petitioner Kilosbayan,
Inc., as a non-stock corporation composed of "civic spirited citizens, pastors, priests,
nuns, and lay leaders who are committed to the cause of truth, justice, and national
renewal." 1 Petitioners Jovito R. Salonga, Cirilo A. Rigos, Ernie Camba, Emilio C.
Capulong, Jr., Jose Abcede, Christine Tan, Felipe L. Gozon, Rafael G. Fernando, Raoul
V. Victorino, Jose Cunanan, and Quintin S. Doromal joined the petition in their capacity
as trustees of Kilosbayan, Inc., and as taxpayers and concerned citizens. 2 Petitioners
Freddie Webb and Wigberto Taada joined the petition as senators, taxpayers and
concerned citizens. 3 Petitioner Joker P. Arroyo joined the petition as a member of the
House of Representative, a taxpayer and a concerned citizen. 4

With due respect to the majority opinion, I wish to focus on the interstices of locus standi,
a concept described by Prof. Paul Freund as "among the most amorphous in the entire
domain of public law." The requirement of standing to sue inheres from the definition of
judicial power. It is not merely a technical rule of procedure which we are at liberty to
disregard. Section 1, Article VIII of the Constitution provides:

xxx xxx xxx

Judicial power includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been a grave abuse
of discretion amounting to lack or excess of jurisdiction on the part of any
branch or instrumentality of the Government. (Italics supplied)

The phrase "actual controversies involving rights which are legally demandable and
enforceable" has acquired a cultivated meaning given by courts. It spells out the
requirements that must be satisfied before one can come to court to litigate a
constitutional issue. Our distinguished colleague, Mr. Justice Isagani A. Cruz, gives a
shorthand summary of these requirements when he states that no constitutional question
will be heard and decided by courts unless there is a showing of the following: . . . (1)
there must be an actual case or controversy; (2) the question of constitutionality must be
raised by the proper party; (3) the constitutional question must be raised at the earliest
possible opportunity; and (4) the decision of the constitutional question must be
necessary to the determination of the case itself. 5

The complexion of the rule on locus standi has been undergoing a change. Mr. Justice
Cruz has observed the continuing relaxation of the rule on
standing, 6 thus:

xxx xxx xxx

A proper party is one who has sustained or is in immediate danger of

sustaining an injury as a result of the act complained of. Until and unless
such actual or potential injury is established, the complainant cannot have
the legal personality to raise the constitutional question.
In Tileson v. Ullmann, a physician questioned the constitutionality of a law
prohibiting the use of contraceptives, upon the ground that it might prove
dangerous to the life or health of some of his patients whose physical
condition would not enable them to bear the rigors of childbirth. The court
dismissed the challenge, holding that the patients of the physician and not
the physician himself were the proper parties.

In Cuyegkeng v. Cruz, the petitioner challenged in a quo

warranto proceeding the title of the respondent who, he claimed, had been
appointed to the board of medical examiners in violation of the provisions
of the Medical Act of 1959. The Supreme Court dismissed the petition,
holding that Cuyegkeng had not made a claim to the position held by Cruz
and therefore could not be regarded as a proper party who had sustained
an injury as a result of the questioned act.

In People v. Vera, it was held that the Government of the Philippines was a
proper party to challenge the constitutionality of the Probation Act because,
more than any other, it was the government itself that should be concerned
over the validity of its own laws.

In Ex Parte Levitt, the petitioner, an American taxpayer and member of the

bar, filed a motion for leave to question the qualifications of Justice Black
who, he averred, had been appointed to the U.S. Supreme Court in violation
of the Constitution of the United States. The Court dismissed the petition,
holding that Levitt was not a proper party since he was not claiming the
position held by Justice Black.

The rule before was that an ordinary taxpayer did not have the proper party
personality to question the legality of an appropriation law since his interest
in the sum appropriated was not substantial enough. Thus, in Custodio v.
Senate President, a challenge by an ordinary taxpayer to the validity of a
law granting back pay to government officials, including members of
Congress, during the period corresponding to the Japanese Occupation
was dismissed as having been commenced by one who was not a proper
party.

Since the first Emergency Powers Cases, however, the rule has been
changed and it is now permissible for an ordinary taxpayer, or a group of
taxpayers, to raise the question of the validity of an appropriation law. As
the Supreme Court then put it. "The transcendental importance to the public
of these cases demands that they be settled promptly and definitely,
brushing aside, if we must, technicalities of procedure."

In Tolentino v. Commission on Elections, it was held that a senator had the

proper party personality to seek the prohibition of a plebiscite for the
ratification of a proposed constitutional amendment. In PHILCONSA v.
Jimenez, an organization of taxpayers and citizens was held to be a proper
party to question the constitutionality of a law providing for special
retirement benefits for members of the legislature.

In Sanidad v. Commission on Elections, the Supreme Court upheld the

petitioners as proper parties, thus

As a preliminary resolution, We rule that the petitioners in L-

44640 (Pablo C. Sanidad and Pablito V. Sanidad)
possess locus standi to challenge the constitutional premise
of Presidential Decree Nos. 991, 1031, and 1033. It is now an
ancient rule that the valid source of a statute Presidential
Decrees are of such nature may be contested by one who
will sustain a direct injury as a result of its enforcement. At the
instance of taxpayers, laws providing for the disbursement of
public funds may be enjoined, upon the theory that the
expenditure of public funds by an officer of the State for the
purpose of executing an unconstitutional act constitutes a
 misapplication of such funds. The breadth of Presidential
Decree No. 991 carries an appropriation of Five Million Pesos
for the effective implementation of its purposes. Presidential
Decree No. 1031 appropriates the sum of Eight Million Pesos
to carry out its provisions. The interest of the aforenamed
petitioners as taxpayers in the lawful expenditure of these
amounts of public money sufficiently clothes them with that
personality to litigate the validity of the Decrees appropriating
said funds. Moreover, as regard taxpayer's suits, this Court
enjoys that open discretion to entertain the same or not. For
the present case, We deem it sound to exercise that discretion
affirmatively so that the authority upon which the disputed
Decrees are predicated may be inquired into.

In Lozada v. Commission on Elections, however, the petitioners were held

without legal standing to demand the filling of vacancies in the legislature
because they had only "a generalized interest' shared with the rest of the
citizenry."

Last July 30, 1993, we further relaxed the rule on standing in Oposa, et al. v. Hon.
Fulgencio S. Factoran, Jr., 7where we recognized the locus standi of minors representing
themselves as well as generations unborn to protect their constitutional right to a
balanced and healthful ecology.

I am perfectly at peace with the drift of our decisions liberalizing the rule on locus standi.
The once stubborn disinclination to decide constitutional issues due to lack of locus
standi is incompatible with the expansion of judicial power mandated in section 1 of Article
VIII of the Constitution, i.e., "to determine whether or not there has been a grave abuse
of discretion, amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the government." As we held thru the ground breaking ponencia of Mr.
Justice Cruz in Daza v. Singson, 8 this provision no longer precludes the Court from
resolving political questions in proper cases. But even perusing this provision as a
constitutional warrant for the court to enter the once forbidden political thicket, it is clear
that the requirement of locus standi has not been jettisoned by the Constitution for it still
commands courts in no uncertain terms to settle only "actual controversies involving
rights which are legally demandable and enforceable." Stated otherwise, courts are
neither free to decide all kinds of cases dumped into their laps nor are they free to open
their doors to all parties or entities claiming a grievance. The rationale for this
constitutional requirement of locus standi is by no means trifle. It is intended "to assure a
vigorous adversary presentation of the case, and, perhaps more importantly to warrant
the judiciary's overruling the determination of a coordinate, democratically elected organ
of government." 9 It thus goes to the very essence of representative democracies. As Mr.
Justice Powell carefully explained in U.S. v.
Richardson, 10 viz:

Relaxation of standing requirements is directly related to the expansion of

judicial power. It seems to me inescapable that allowing unrestricted
taxpayer or citizen standing would significantly alter the allocation of power
at the national level, with a shift away from a democratic form of
government. I also believe that repeated and essentially head-on
confrontations between the life-tenured branch and the representative
branches of government will not, in the long run, be beneficial to either. The
public confidence essential to the former and the vitality critical to the latter
may well erode if we do not exercise self- restraint in the utilization of our
power to negative the actions of the other branches. We should be ever
mindful of the contradictions that would arise if a democracy were to permit
at large oversight of the elected branches of government by a non-
representative, and in large measure insulated, judicial branch. Moreover,
the argument that the Court should allow unrestricted taxpayer or citizen
standing underestimates the ability of the representative branches of the
Federal Government to respond to the citizen pressure that has been
responsible in large measure for the current drift toward expanded standing.
Indeed, taxpayer or citizen advocacy, given its potentially broad base, is
 precisely the type of leverage that in a democracy ought to be employed
against the branches that were intended to be responsive to public attitudes
about the appropriate operation of government. "We must as judges recall
that, as Mr. Justice Holmes wisely observed, the other branches of
Government are ultimate guardians of the liberties and welfare of the people
in quite as great a degree as the courts."

Unrestrained standing in federal taxpayer or citizen suits would create a

remarkably illogical system of judicial supervision of the coordinate
branches of the Federal Government. Randolph's proposed Council of
Revision, which was repeatedly rejected by the Framers, at least had the
virtue of being systematic; every law passed by the legislature automatically
would have been previewed by the judiciary before the law could take effect.
On the other hand, since the judiciary cannot select the taxpayers or citizens
who bring suit or the nature of the suits, the allowance of public actions
would produce uneven and sporadic review, the quality of which would be
influenced by the resources and skill of the particular plaintiff. And issues
would be presented in abstract form, contrary to the Court's recognition that
"judicial review is effective largely because it is not available simply at the
behest of a partisan faction, but is exercised only to remedy a particular,
concrete injury." Sierra Club v. Morton, 405 U.S. 727, 740-741, n. 16 (1972).

A lesser but not insignificant reason for screening the standing of persons who desire to
litigate constitutional issues is economic in character. Given the sparseness of our
resources, the capacity of courts to render efficient judicial service to our people is
severely limited. For courts to indiscriminately open their doors to all types of suits and
suitors is for them to unduly overburden their dockets, and ultimately render themselves
ineffective dispensers of justice. To be sure, this is an evil that clearly confronts our
judiciary today.

Prescinding from these premises, and with great reluctance, I am not prepared to
concede the standing to sue of petitioners. On a personal level, they have not shown that
elemental injury in fact which will endow them with a standing to sue. It must be stressed
that petitioners are in the main, seeking the nullity not of a law but of a Contract of Lease.
Not one of the petitioners is a party to the Contract of Lease executed between PCSO
and PGMC. None of the petitioners participated in the bidding, and hence they are not
losing bidders. They are complete strangers to the contract. They stand neither to gain
nor to lose economically by its enforcement. It seems to me unusual that an unaffected
third party to a contract could be allowed to question its validity. Petitioner Kilosbayan
cannot justify this officious interference on the ground of its commitment to "truth, justice
and national renewal." Such commitment to truth, justice and national renewal, however
noble it may be, cannot give Kilosbayan a roving commission to check the validity of
contracts entered into by the government and its agencies. Kilosbayan is not a private
commission on audit.

Neither can I perceive how the other petitioners can be personally injured by the Contract
of Lease between PCSO and PGMC even if petitioner Salonga assails as unmitigated
fraud the statistical probability of winning the lotto as he compared it to the probability of
being struck twice by lightning. The reason is obvious: none of the petitioners will be
exposed to this alleged fraud for all of them profess to abjure playing the lotto. It is self-
evident that lotto cannot physically or spiritually injure him who does not indulge in it.

Petitioners also contend they have locus standi as taxpayers. But the case at bench does
not involve any expenditure of public money on the part of PCSO. In fact, paragraph 2 of
the Contract of Lease provides that it is PGMC that shall build, furnish, and maintain at
its own expense and risk the facilities for the On-Line Lottery System of PCSO and shall
bear all maintenance and other costs. Thus, PGMC alleged it has already spent P245M
in equipment and fixtures and would be investing close to P1 billion to supply adequately
the technology and other requirements of PCSO. 11 If no tax money is being illegally
deflected in the Contract of Lease between PCSO and PGMC, petitioners have no
standing to impugn its validity as taxpayers. Our ruling in Dumlao v. Comelec, 12 settled
this issue well enough, viz:
 However, the statutory provisions questioned in this case, namely, sec. 7,
BP Blg. 51, and sections 4, 1, and 5 BP Blg. 52, do not directly involve the
disbursement of public funds. While, concededly, the elections to be held
involve the expenditure of public moneys, nowhere in their Petition do said
petitioners allege that their tax money is "being extracted and spent in
violation of specific constitutional protections against abuses of legislative
power" (Flast v. Cohen, 392 U.S. 83 [1960]), or that there is a misapplication
of such funds by respondent COMELEC (see Pascual vs. Secretary of
Public Works, 110 Phil. 331 [1960]), or that public money is being deflected
to any improper purpose. Neither do petitioners seek to restrain respondent
from wasting public funds through the enforcement of an invalid or
unconstitutional law. (Philippine Constitution Association vs. Mathay, 18
SCRA 300 [1966]), citing Philippine Constitution Association vs. Gimenez,
15 SCRA 479 [1965]). Besides, the institution of a taxpayer's suit, per se, is
no assurance of judicial review. As held by this Court in Yan vs.
Macapagal(43 SCRA 677 [1972]), speaking through our present Chief
Justice, this Court is vested with discretion as to whether or not a taxpayer's
suit should be entertained.

Next, petitioners plead their standing as "concerned citizens." As citizens, petitioners are
pleading that they be allowed to advocate the constitutional rights of other persons who
are not before the court and whose protection is allegedly their concern. A
citizen qua citizen suit urges a greater relaxation of the rule on locus standi. I feel no
aversion to the further relaxation of the rule on standing to accommodate what in other
jurisdictions is known as an assertion of jus tertii in constitutional litigation provided the
claimant can demonstrate: (1) an injury in fact to himself, and (2) the need to prevent the
erosion of a preferred constitutional right of a third person. As stressed before, the first
requirement of injury in fact cannot be abandoned for it is an essential element for the
exercise of judicial power. Again, as stressed by Mr. Justice Powell, viz: 13

The revolution in standing doctrine that has occurred, particularly in the 12

years since Baker v. Carr, supra, has not meant, however, that standing
barriers have disappeared altogether. As the Court noted in Sierra Club,
"broadening the categories of injury that may be alleged in support of
standing is a different matter from abandoning the requirement that the
party seeking review must himself have suffered an injury." 405 U.S., at 738
. . . Indeed, despite the diminution of standing requirements in the last
decade, the Court has not broken with the traditional requirement that, in
the absence of a specific statutory grant of the right of review, a plaintiff
must allege some particularized injury that sets him apart from the man on
the street.

I recognize that the Court's allegiance to a requirement of particularized

injury has on occasion required a reading of the concept that threatens to
transform it beyond recognition. E.G., Baker v. Carr, supra; Flast v. Cohen,
supra. But despite such occasional digressions, the requirement remains,
and I think it does so for the reasons outlined above. In recognition of those
considerations, we should refuse to go the last mile towards abolition of
standing requirements that is implicit in broadening the "precarious
opening" for federal taxpayers created by Flast, see 392 U.S., at 116 (Mr.
Justice Fortas, concurring) or in allowing a citizen qua citizen to invoke the
power of the federal courts to negative unconstitutional acts of the Federal
Government.

In sum, I believe we should limit the expansion of federal taxpayer and

citizen standing in the absence of specific statutory authorization to an outer
boundary drawn by the results in Flast and Baker v. Carr. I think we should
face up to the fact that all such suits are an effort "to employ a federal court
as a forum in which to air . . . generalized grievances about the conduct of
government or the allocation of power in the Federal System." Flast v.
Cohen, 392 U.S., at 106. The Court should explicitly reaffirm traditional
prudential barriers against such public actions. My reasons for this view are
rooted in respect for democratic processes and in the conviction that "[t]he
powers of the federal judiciary will be adequate for the great burdens placed
 upon them only if they are employed prudently, with recognition of the
strengths as well as the hazards that go with our kind of representative
government." Id., at 131

The second requirement recognizes society's right in the protection of certain preferred
rights in the Constitution even when the rightholders are not before the court. The theory
is that their dilution has a substantial fall out detriment to the rights of others, hence the
latter can vindicate them.

In the case at bench, it is difficult to see how petitioners can satisfy these two
requirements to maintain a jus tertiiclaim. They claim violation of two constitutional
provisions, to wit:

Section 1, Article XIII. The Congress shall give highest priority to the
enactment of measures that protect and enhance the right of all the people
to human dignity, reduce social, economic, and political inequalities, and
remove cultural inequities by equitably diffusing wealth and political power
for the common good.

To this end, the State shall regulate the acquisition, ownership, use, and
disposition of property and its increments.

and

Section 11, Article XII. - No franchise, certificate, or any other form of

authorization for the operation of a public utility shall be granted except to
citizens of the Philippines or to corporations or associations organized
under the laws of the Philippines at least sixty per centum of whose capital
is owned by such citizens, nor shall such franchise, certificate, or
authorizations be exclusive in character or for a longer period than fifty
years. Neither shall any such franchise or right be granted except under the
condition that it shall be subject to amendment, alteration, or repeal by the
Congress when the common good so requires. The State shall encourage
 equity participation in public utilities by the general public. The participation
of foreign investors in the governing body of any public utility enterprise shall
be limited to their proportionate share in its capital, and all the executive
and managing officers of such corporation or association must be citizen of
the Philippines.

Section 1, Article XIII of the Constitution cannot be the matrix of petitioners' jus tertii claim
for it expresses no more than a policy direction to the legislative in the discharge of its
ordained duty to give highest priority to the enactment of measures that protect and
enhance the right of all the people to human dignity, reduce social, economic, and political
inequalities and remove cultural inequities by equitably diffusing wealth and political
power for the common good. Whether the act of the legislature in amending the charter
of PCSO by giving it the authority to conduct lotto and whether the Contract of Lease
entered into between PCSO and PGMC are incongruent to the policy direction of this
constitutional provision is a highly debatable proposition and can be endlessly argued.
Respondents steadfastly insist that the operation of lotto will increase the revenue base
of PCSO and enable government to provide a wider range of social services to the people.
They also allege that the operation of high-tech lotto will eradicate illegal jueteng.
Petitioners are scandalized by this submission. They dismiss gambling as evilper se and
castigate government for attempting to correct a wrong by committing another wrong. In
any event, the proper forum for this debate, however cerebrally exciting it may be, is not
this court but congress. So we held in PCSO v. Inopiquez, to wit: 14

By bringing their suit in the lower court, the private respondents in G.R. No.
79084 do not question the power of PCSO to conduct the Instant
Sweepstakes game. Rather, they assail the wisdom of embarking upon this
project because of their fear of the "pernicious repercussions" which may
be brought about by the Instant Sweepstakes Game which they have
labelled as "the worst form of gambling" which thus "affects the moral
values" of the people.
 The Court, as held in several cases, does not pass upon questions of
wisdom, justice, or expediency of legislation and executive acts. It is not the
province of the courts to supervise legislation or executive orders as to keep
them within the bounds of propriety, moral values and common sense. That
is primarily and even exclusively a concern of the political departments of
the government; otherwise, there will be a violation of the principle of
separation of powers. (Italics supplied)

I am not also convinced that petitioners can justify their locus standi to advocate the rights
of hypothetical third parties not before the court by invoking the need to keep inviolate
section 11, Article XII of the Constitution which imposes a nationality requirement on
operators of a public utility. For even assuming arguendo that PGMC is a public utility,
still, the records do not at the moment bear out the claim of petitioners that PGMC is a
foreign owned and controlled corporation. This factual issue remains unsettled and is still
the subject of litigation by the parties in the Securities and Exchange Commission. We
are not at liberty to anticipate the verdict on this contested factual issue. But over and
above this consideration, I respectfully submit that this constitutional provision does not
confer on third parties any right of a preferred status comparable to the Bill of Rights
whose dilution will justify petitioners to vindicate them in behalf of its rightholders. The
legal right of hypothetical third parties they profess to advocate is to my mind too
impersonal, too unsubstantial, too indirect, too amorphous to justify their access to this
Court and the further lowering of the constitutional barrier of locus standi.

Again, with regret, I do not agree that the distinguished status of some of the petitioners
as lawmakers gives them the appropriate locus standi. I cannot perceive how their
constitutional rights and prerogatives as legislators can be adversely affected by the
contract in question. Their right to enact laws for the general conduct of our society
remains unimpaired and undiminished. 15 Their status as legislators, notwithstanding,
they have to demonstrate that the said contract has caused them to suffer a personal,
direct, and substantial injury in fact. They cannot simply advance a generic grievance in
common with the people in general.
I am not unaware of our ruling in De Guia v. Comelec, 16 viz:

Before addressing the crux of the controversy, the Court observes that
petitioner does not allege that he is running for reelection, much less, that
he is prejudiced by the election, by district, in Paraaque. As such, he does
not appear to have locus standi, a standing in law, a personal or substantial
interest. (Sanidad vs. COMELEC, G.R. No. L-44640, October 12, 1976, 73
SCRA 333; Municipality of Malabang vs. Benito, G.R. No. L-28113, March
28, 1969, 27 SCRA 533). He does not also allege any legal right that has
been violated by respondent. If for this alone, petitioner does not appear to
have any cause of action.

However, considering the importance of the issue involved, concerning as

it does the political exercise of qualified voters affected by the
apportionment, and petitioner alleging abuse of discretion and violation of
the Constitution by respondent, We resolved to brush aside the question of
procedural infirmity, even as We perceive the petition to be one of
declaratory relief. We so held similarly through Mr. Justice Edgardo L. Paras
in Osmena vs. Commission on Elections.

It is my respectful submission, however, that we should re-examine de Guia. It treated

the rule on locus standi as a mere procedural rule. It is not a plain procedural rule but a
constitutional requirement derived from section 1, Article VIII of the Constitution which
mandates courts of justice to settle only "actual controversies involving rights which are
legally demandable and enforceable." The phrase has been construed since time
immemorial to mean that a party in a constitutional litigation must demonstrate a standing
to sue. By downgrading the requirement on locus standi as a procedural rule which can
be discarded in the name of public interest, we are in effect amending the Constitution by
judicial fiat.

De Guia would also brush aside the rule on locus standi if a case raises an important
issue. In this regard, I join the learned observation of Mr. Justice Feliciano: "that it is not
enough for the Court simply to invoke 'public interest' or even 'paramount considerations
of national interest,' and to say that the specific requirements of such public interest can
only be ascertained on a 'case to case' basis. For one thing, such an approach is not
intellectually satisfying. For another, such an answer appears to come too close to saying
that locus standi exists whenever at least a majority of the Members of this Court
participating in a case feel that an appropriate case for judicial intervention has arisen."

I also submit that de Guia failed to perceive that the rule on locus standi has little to do
with the issue posed in a case, however, important it may be. As well pointed out in Flast
v. Cohen: 17

The fundamental aspect of standing is that it focuses on the party seeking

to get his complaint before a federal court and not on the issues he wishes
to have adjudicated. The "gist of the question of standing" is whether the
party seeking relief has "alleged such a personal stake in the outcome of
the controversy as to assure that concrete adverseness which sharpens the
presentation of issues upon which the court so largely depends for
illumination of difficult constitutional questions." Baker v. Carr,369 U.S. 186,
204 (1962). In other words, when standing is placed in issue in a case, the
question is whether the person whose standing is challenged is a proper
party to request an adjudication of a particular issue and not whether the
issue itself is justiciable. Thus, a party may have standing in a particular
case, but the federal court may nevertheless decline to pass on the merits
of the case because, for example, it presents a political question. A proper
party is demanded so that federal courts will not be asked to decide "ill-
defined controversies over constitutional issues," United public Workers v.
Mitchell, 330 U.S. 75, 90 (1947), or a case which is of "a hypothetical or
abstract character," Aetna Life Insurance Co. v. Haworth, 300 U.S. 227, 240
(1937).

It is plain to see that in de Guia, the court took an unorthodox posture, to say the least. It
held there was no proper party before it, and yet it resolved the issues posed by the
petition. As there was no proper party before the court, its decision is vulnerable to be
criticized as an advisory opinion.

With due respect, the majority decision appears to have set a dangerous precedent by
unduly trivializing the rule on locus standi. By its decision, the majority has entertained a
public action to annul a private contract. In so doing, the majority may have given sixty
(60) million Filipinos the standing to assail contracts of government and its agencies. This
is an invitation for chaos to visit our law on contract, and certainly will not sit well with
prospective foreign investors. Indeed, it is difficult to tread the path of the majority on this
significant issue. The majority granted locus standi to petitioners because of lack of any
other party with more direct and specific interest. But one has standing because he has
standing on his own and standing cannot be acquired because others with standing have
refused to come to court. The thesis is also floated that petitioners have standing as they
can be considered taxpayers with right to file derivative suit like a stockholder's derivative
suit in private corporations. The fact, however, is that PCSO is not a private but a quasi-
public corporation. Our law on private corporation categorically sanctions stockholder's
derivative suit. In contrast, our law on public corporation does not recognize this so-called
taxpayer's derivative suit. Hence, the idea of a taxpayer's derivative suit, while alluring,
has no legal warrant.

Our brethren in the majority have also taken the unprecedented step of striking down a
contrast at the importunings of strangers thereto, but without justifying the interposition of
judicial power on any felt need to prevent violation of an important constitutional provision.
The contract in question was voided on the sole ground that it violated an ordinary statute,
section 1 of R.A. 1169, as amended by B.P. Blg. 42. If there is no provision of the
Constitution that is involved in the case at bench, it boggles the mind how the majority
can invoke considerations of national interest to justify its abandonment of the rule
on locus standi. The volume of noise created by the case cannot magically convert it to a
case of paramount national importance. By its ruling, the majority has pushed the Court
in unchartered water bereft of any compass, and it may have foisted the false hope that
it is the repository of all remedies.
If I pay an unwavering reverence to the rule of locus standi, it is because I consider it as
a touchstone in maintaining the proper balance of power among the three branches of
our government. The survival of our democracy rests in a large measure on our ability to
maintain this delicate equipoise of powers. For this reason, I look at judicial review from
a distinct prism. I see it both as a power and a duty. It is a power because it enables the
judiciary to check excesses of the Executive and the Legislative. But, it is also a duty
because its requirement of locus standi, among others, Executive and the Legislative.
But, it is also a duty because its requirement of locus standi, among others, keeps the
judiciary from overreaching the powers of the other branches of government. By
balancing this duality, we are able to breathe life to the principle of separation of powers
and prevent tyranny. To be sure, it is our eternal concern to prevent tyranny but that
includes tyranny by ourselves. The Constitution did not install a government by the
judiciary, nay, not a government by the unelected. In offering this submission, I reject the
sublimal fear that an unyielding insistence on the rule on locus standi will weaken the
judiciary vis-a-vis the other branches of government. The hindsight of history ought to tell
us that it is not power per se that strengthens. Power unused is preferable than power
misused. We contribute to constitutionalism both by the use of our power to decide and
its non use. As well said, the cases we decide are as significant as the cases we do not
decide. Real power belongs to him who has power over power.

IN VIEW WHEREOF, and strictly on the ground of lack of locus standi on the part of
petitioners, I vote to DENY the petition.

VITUG, J., dissenting:

Judicial power encompasses both an authority and duty to resolve "actual controversies
involving rights which are legally demandable and enforceable" (Article VIII, Section 1,
1987 Constitution). As early as the case of Lamb vs. Phipps, 1 this Court ruled: "Judicial
power, in its nature, is the power to hear and decide causes pending between parties who
have the right to sue in the courts of law and equity." 2 An essential part of, and corollary
to, this principle is the locus standi of a party litigant, referring to one who is directly
affected by, and whose interest is immediate and substantial in, the controversy. The rule
requires that a party must show a personal stake in the outcome of the case or an injury
to himself that can be redressed by a favorable decision so as to warrant his invocation
of the court's jurisdiction and to justify the exercise of the court's remedial powers in his
behalf. 3 If it were otherwise, the exercise of that power can easily become too unwieldy
by its sheer magnitude and scope to a point that may, in no small degree, adversely affect
its intended essentiality, stability and consequentiality.

Locus standi, nevertheless, admits of the so-called "taxpayer's suit." Taxpayer's suits are
actions or proceedings initiated by one or more taxpayers in their own behalf or,
conjunctively, in representation of others similarly situated for the purpose of declaring
illegal or unauthorized certain acts of public officials which are claimed to be injurious to
their common interests as such taxpayers (Cf. 71 Am Jur 2d., 179-180). The principle is
predicated upon the theory that taxpayers are, in equity, the cestui que trust of tax funds,
and any illegal diminution thereof by public officials constitutes a breach of trust even as
it may result in an increased burden on taxpayers (Haddock vs. Board of Public
Education, 86 A 2d 157; Henderson vs. McCormick, 17 ALR 2d 470).

Justice Brandeis of the United States Supreme Court, in his concurring opinion
in Ashwander vs. Tennessee Valley Authority (297 U.S. 288), said:

. . . . The Court will not pass upon the validity of a statute upon complaint of
one who fails to show that he is injured by its operation. Tyler v. The
Judges, 179 U.S. 405; Hendrick v. Maryland, 234 U.S. 610, 621. Among the
many applications of this rule, none is more striking than the denial of the
right of challenge to one who lacks a personal or property right. Thus, the
challenge by a public official interested only in the performance of his official
duty will not be entertained. Columbus & Greenville Ry. v. Miller, 283 U.S.
96, 99-100. In Fairchild v. Hughes, 258 U.S. 126, the Court affirmed the
dismissal of a suit brought by a citizen who sought to have the Nineteenth
Amendment declared unconstitutional. InMassachusetts v. Mellon, 262
U.S. 447, the challenge of the federal Maternity Act was not entertained
although made by the Commonwealth on behalf of all its citizens."
Justice Brandeis' view, shared by Justice Frankfurter in Joint Anti-Fascist Refugee
Commission vs. McGrath (351 U.S. 123), was adopted by the U.S. Supreme Court in
Flast vs. Cohen (392 U.S. 83) which held that it is only when a litigant is able to show
such a personal stake in the controversy as to assure a concrete adverseness in the
issues submitted that legal standing can attach.

A "taxpayer's suit," enough to confer locus standi to a party, we have held before, is
understood to be a case where the act complained of directly involves the illegal
disbursement of public funds derived from taxation.4 It is not enough that the dispute
concerns public funds. A contrary rule could easily lead to a limitless application of the
term "taxpayer's suit," already by itself a broad concept, since a questioned act of
government would almost so invariably entail, as a practical matter, a financial burden of
some kind.

To be sure, serious doubts have even been raised on the propriety and feasibility of
unqualifiedly recognizing the "taxpayer's suit" as an exception from the standard rule of
requiring a party who invokes the exercise of judicial power to have a real and personal
interest or a direct injury in the outcome of a controversy. This Court has heretofore
spoken on the matter, at times even venturing beyond the usual understanding of its
applicability in the name of national or public interest. It is remarkable, nevertheless, that
the accepted connotation of locus standi has still managed to be the rule, sanctioning, by
way of exception, the so-called "taxpayer's suit" which courts accept on valid and
compelling reasons.

A provision which has been introduced by the 1987 Constitution is a definition, for the first
time in our fundamental law, of the term "judicial power," as such authority and duty of
courts of justice "to settle actual controversies involving rights which are legally
demandable and enforceable and to determine whether or not there has been a grave
abuse of discretion, amounting to lack or excess of jurisdiction, on the part of any branch
or instrumentality of the Government" (Article VIII, Section 1, Constitution). I take it that
the provision has not been intended to unduly mutate, let alone to disregard, the long
established rules on locus standi. Neither has it been meant, I most respectfully submit,
to do away with the principle of separation of powers and its essential incidents such as
by, in effect, conferring omnipotence on, or allowing an intrusion by, the courts in respect
to purely political decisions, the exercise of which is explicitly vested elsewhere, and
subordinate, to that of their own, the will of either the Legislative Department or the
Executive Department both co- equal, independent and coordinate branches, along
with the Judiciary, in our system of government. Again, if it were otherwise, there indeed
would be truth to the charge, in the words of some constitutionalists, that "judicial tyranny"
has been institutionalized by the 1987 Constitution, an apprehension which should, I
submit, rather be held far from truth and reality.

In sum, while any act of government, be it executive in nature or legislative in character,

may be struck down and declared a nullity either because it contravenes an express
provision of the Constitution or because it is perceived and found to be attended by or the
result of grave abuse of discretion, amounting to lack or excess of jurisdiction, that issue,
however, must first be raised in a proper judicial controversy. The Court's authority to look
into and grant relief in such cases would necessitate locus standi on the part of party
litigants. This requirement, in my considered view, is not merely procedural or technical
but goes into the essence of jurisdiction and the competence of courts to take cognizance
of justiciable disputes.

In Bugnay Construction and Development Corporation vs. Laron, 5 this Court ruled:

. . . . Considering the importance to the public of a suit assailing the

constitutionality of a tax law, and in keeping with the Court's duty, specially
explicated in the 1987 Constitution, to determine whether or not the other
branches of the Government have kept themselves within the limits of the
Constitution and the laws and that they have not abused the discretion given
to them, the Supreme Court may brush aside technicalities of procedure
and take cognizance of the suit. (Citing Kapatiran vs. Tan, G.R. No. 81311,
June 30, 1988.)
 However, for the above rule to apply, it is exigent that the taxpayer-plaintiff
sufficiently show that he would be benefited or injured by the judgment or
entitled to the avails of the suit as a real party in interest. (Citing Estate of
George Litton vs. Mendoza, G.R. No. 49120, June 30, 1988.) Before he can
invoke the power of judicial review, he must specifically prove that he has
sufficient interest in preventing the illegal expenditure of money raised by
taxation (citing 11 Am. Jur. 761; Dumlao, et al. vs. Commission on
Elections, 95 SCRA 392) and that he will sustain a direct injury as a result
of the enforcement of the questioned statute or contract. (Citing Sanidad, et
al. vs. Commission on Elections, et al., 73 SCRA 333.) It is not sufficient
that he has merely a general interest common to all members of the public.
(Citing Ex Parte Levitt, 302 U.S. 633, cited in 15 SCRA 497, Annotation.)

As so well pointed out by Mr. Justice Camilo D. Quiason during the Court's deliberations,
"due respect and proper regard for the rule on locus standi would preclude the rendition
of advisory opinions and other forms of pronouncement on abstract issues, avoid an
undue interference on matters which are not justiciable in nature and spare the Court
from getting itself involved in political imbroglio."

The words of Senate President Edgardo J. Angara, carry wisdom; we quote:

The powers of the political branches of our government over economic

policies is rather clear: the Congress is to set in broad but definite strokes
the legal framework and structures for economic development, while the
Executive provides the implementing details for realizing the economic ends
identified by Congress and executes the same.

xxx xxx xxx

If each economic decision made by the political branches of government,

particularly by the executive, are fully open to re-examination by the judicial
branch, then very little, if any, reliance can be placed by private economic
actors on those decisions. Investors would always have to factor in possible
 costs arising from judicially-determined changes affecting their immediate
business, notwithstanding assurances by executive authorities.

Judicial decisions are, in addition, inflexible and can never substitute for
sound decision-making at the level of those who are assigned to execute
the laws of the land. Since judicial power cannot be exercised unless an
actual controversy is brought before the courts for resolution, decisions
cannot be properly modified unless another appropriate controversy arises."
(Sen. Edgardo J. Angara, "The Supreme Court in Economic Policy Making,"
Policy Review A Quarterly Journal of Policy Studies, Vol. 1, No. 1,
January-March 1994, published by the Senate Policy Studies Group, pp. 2-
3.)

A further set-back in entertaining the petition is that it unfortunately likewise strikes at

factual issues. The allegations to the effect that irregularities have been committed in the
processing and evaluation of the bids to favor respondent PGMC; that the Malacaang
Special Review Committee did not verify warranties embodied in the contract; that the
operation of telecommunication facilities is indispensable in the operation of the lottery
system; the involvement of multi-national corporations in the operation of the on-line "hi-
tech" lottery system, and the like, require the submission of evidence. This Court is not a
trier of facts, and it cannot, at this time, resolve the above issues. Just recently, the Court
has noted petitioners' manifestation of its petition with the Securities and Exchange
Commission "for the nullification of the General Information Sheets of PGMC" in respect
particularly to the nationality holdings in the corporation. The doctrine of primary
jurisdiction would not justify a disregard of the jurisdiction of, nor would it permit us to now
preempt, said Commission on the matter.

Petitioners strongly assert, in an attempt to get the Court's concurrence in accepting the
petition, that since lottery is a game of chance, the "lotto" system would itself be a "crime
against morals" defined by Articles 195-199 6 of the Revised Penal Code.
Being immoral and a criminal offense under the Revised Penal Code, petitioners contend,
any special law authorizing gambling must, by all canons of statutory constructions, be
interpreted strictly against the grantee. Citing previous decisions of this Court, they
maintain that lottery is gambling, pure and simple, 7 and that this Court has consistently
condemned the immorality and illegality of gambling to be a "national offense and not a
minor transgression;" 8 "that it is a social scourge which must be stamped out;" 9 and,
"that it is pernicious to the body politic and detrimental to the nation and its citizens." 10

I most certainly will not renounce this Court's above concerns. Nevertheless, the Court
must recognize the limitations of its own authority. Courts neither legislate nor ignore legal
mandates. Republic Act No. 1169, as amended, explicitly gives public respondent

PCSO the authority and power "to hold and conduct sweepstakes races, lotteries, and
other similar activities." In addition, it is authorized:

c. To undertake any other activity that will enhance its funds generation,
operations and funds management capabilities, subject to the same
limitations provided for in the preceding paragraph.

It shall have a Board of Directors, hereinafter designated the Board,

composed of five members who shall be appointed, and whose
compensation and term of office shall be fixed, by the President.

xxx xxx xxx

Sec.9. Powers and functions of the Board of Directors. The Board of

Directors of the Office shall have the following powers and functions.

(a) To adopt or amend such rules and regulations to implement the

provisions of this Act.

xxx xxx xxx

 (d) To promulgate rules and regulations for the operation of the Office and
to do such act or acts as may be necessary for the attainment of its
purposes and objectives. (Emphasis supplied).

In People vs. Dionisio, 11 cited by the petitioners themselves, we remarked: "What evils
should be corrected as pernicious to the body politic, and how correction should be done,
is a matter primarily addressed to the discretion of the legislative department, not of the
courts . . . ." In Valmonte vs. PCSO, 12 we also said:

The Court, as held in several cases, does not pass upon questions of
wisdom, justice or expediency of legislation and executive acts. It is not the
province of the courts to supervise legislation or executive orders as to keep
them within the bounds of propriety, moral values and common sense. That
is primarily and even exclusively a concern of the political departments of
the government; otherwise, there will be a violation of the principle of
separation of powers.

The constraints on judicial power are clear. I feel, the Court must thus beg off, albeit not
without reluctance, from giving due course to the instant petition.

Accordingly, I vote for the dismissal of the petition.

KAPUNAN, J., dissenting:

I regret that I am unable to join my colleagues in the majority in spite of my own personal
distaste for gambling and other gaming operations. Such considerations aside, I feel there
are compelling reasons why the instant petition should be dismissed. I shall forthwith state
the reasons why.

Petitioners anchor their principal objections against the contract entered into between the
Philippine Charity Sweepstakes Office (PCSO) and the PGMC on the ground that the
contract entered into by the PCSO with the PGMC violates the PCSO Charter (R.A. No.
1169 as amended by B.P. Blg 427, specifically section 1 thereof which bars the said body
from holding conducting lotteries "in collaboration, association or joint venture with any
person association, company or entity."). However, a perusal of the petition reveals that
the compelling reasons behind it, while based on apparently legal questions involving the
contract between the PCSO and the PGMC, are prompted by the petitioners' moral
objections against the whole idea of gambling operations operated by the government
through the PCSO. The whole point of the petition, in essence, is a fight between good
and evil, between the morality or amorality of lottery operations conducted on a wide scale
involving millions of individuals and affecting millions of lives. Their media of opposition
are the above stated defects in the said contract which they assail to be fatally defective.
They come to this Court, as taxpayers and civic spirted citizens, asserting a right of
standing on a transcendental issue which they assert to be of paramount public interest.

Moral or legal questions aside, I believe that there are unfortunately certain
standards1 that have to be followed in the exercise of this Court's awesome power of
review before this Court could even begin to assay the validity of the contract between
the PCSO and the PGMC. This, in spite of the apparent expansion of judicial power
granted by Section 1 of Article VIII of the 1987 Constitution. It is fundamental that such
standards be complied with before this Court could even begin to explore the substantive
issues raised by any controversy brought before it, for no issue brought before this court
could possibly be so fundamental and paramount as to warrant a relaxation of the
requisite rules for judicial review developed by settled jurisprudence inorder to avoid
entangling this court in controversies which properly belong to the legislative or executive
branches of our government. The potential harm to our system of government, premised
on the concept of separation of powers, by the Court eager to exercise its powers and
prerogatives at every turn, cannot be gainsaid. The Constitution does not mandate this
Court to wield the power of judicial review with excessive vigor and alacrity in every area
or at every turn, except in appropriate cases and controversies which meet established
requirements for constitutional adjudication. Article VIII Sec. 1 of the Constitution
notwithstanding, there are questions which I believe are still beyond the pale of judicial
power. Moreover, it is my considered opinion that the instant petition does not meet the
requirements set by this court for a valid exercise of judicial review.
Our Constitution expressly defines judicial power as including "the duty to settle actual
cases and controversies involving rights which are legally demandable and enforceable,
and to determine whether or not there has been a grave abuse of discretion amounting
to a lack or excess of jurisdiction on the part of any branch or instrumentality of the
government." 2 This constitutional requirement for an actual case and controversy limits
this Court's power of review to precisely those suits between adversary litigants with real
interests at stake2 thus preventing it from making all sorts of hypothetical
pronouncements on abstract, contingent and amorphous issues. The Court will therefore
not pass upon the validity of an act of government or a statute passed by a legislative
body without a requisite showing of injury. 3 A personal stake is essential, which absence
renders our pronouncements gratuitous and certainly violative of the constitutional
requirement for actual cases and controversies.

The requirement for standing based on personal injury may of course be bypassed, as
the petitioners in this case attempt to do, by considering the case as a "taxpayer suit"
which would thereby clothe them with the personality they would lack under ordinary
circumstances. However, the act assailed by the petitioners on the whole involves
the generation rather than disbursement of public funds. In a line of cases starting
from Pascual v. Secretary of Public Works 4 "taxpayer suits" have been understood to
refer only to those cases where the act or statute assailed involves the illegal or
unconstitutional disbursement of public funds derived from taxation. The main premise
behind the "taxpayer suit" is that the pecuniary interest of the taxpayer is involved
whenever there is an illegal or wasteful use of public funds which grants them the right to
question the appropriation or disbursement on the basis of their contribution to
government funds. 5 Since it has not been alleged that an illegal appropriation or
disbursement of a fund derived from taxation would be made in the instant case, I fail to
see how the petitioners in this case would be able to satisfy the locus standi requirement
on the basis of a "taxpayer's suit". This alone should inhibit this Court from proceeding
with the case at bench. The interest alleged and the potential injury asserted are far too
general and hypothetical for us to rush into a judicial determination of what to me appears
to be judgment better left to executive branch of our government.
This brings me to one more important point: The idea that a norm of constitutional
adjudication could be lightly brushed aside on the mere supposition that an issue before
the Court is of paramount public concern does great harm to a democratic system which
espouses a delicate balance between three separate but co-equal branches of
government. It is equally of paramount public concern, certainly paramount to the survival
of our democracy, that acts of the other branches of government are accorded due
respect by this Court. Such acts, done within their sphere of competence, have been
and should always be accorded with a presumption of regularity. When such acts are
assailed as illegal or unconstitutional, the burden falls upon those who assail these acts
to prove that they satisfy the essential norms of constitutional adjudication, because when
we finally proceed to declare an act of the executive or legislative branch of our
government unconstitutional or illegal, what we actually accomplish is the thwarting of the
will of the elected representatives of the people in the executive or legislative branches
government.6 Notwithstanding Article VIII, Section 1 of the Constitution, since the
exercise of the power of judicial review by this Court is inherently antidemocratic, this
Court should exercise a becoming modesty in acting as a revisor of an act of the
executive or legislative branch. The tendency of a frequent and easy resort to the function
of judicial review, particularly in areas of economic policy has become lamentably too
common as to dwarf the political capacity of the people expressed through their
representatives in the policy making branches of government and to deaden their sense
of moral responsibility. 7

This court has been accused, of late, of an officious tendency to delve into areas better
left to the political branches of government. 8 This tendency, if exercised by a court
running riot over the other co-equal branches of government, poses a greater danger to
our democratic system than the perceived danger real or imagined of an executive
branch espousing economic or social policies of doubtful moral worth. Moreover
economic policy decisions in the current milieu- including the act challenged in the instant
case-involve complex factors requiring flexibility and a wide range of discretion on the
part of our economic managers which this Court should respect because our power of
review, under the constitution, is a power to check, not to supplant those acts or decisions
of the elected representatives of the people.

Finally, the instant petition was brought to this Court on the assumption that the issue at
bench raises primarily constitutional issues. As it has ultimately turned out, the core
foundation of the petitioners' objections to the LOTTO operations was based on the
validity of the contract between the PCSO and the PGMC in the light of Section 1 of R.A.
1169 as amended by B.P. Blg. 427. It might have been much more appropriate for the
issue to have taken its normal course in the courts below.

I vote to deny the petition.

# Separate Opinions

CRUZ, J., concurring:

I am happy to join Mr. Justice Hilario G. Davide, Jr. in his excellent ponencia. I will add
the following personal observations only for emphasis as it is not necessary to
supplement his thorough exposition.

The respondents take great pains to cite specific provisions of the contract to show that
it is PCSO that is actually operating the on-line lottery, but they have not succeeded in
disproving the obvious, to wit, that the document was intentionally so crafted to make it
appear that the operation is not a joint undertaking of PCSO and PGMC but a mere lease
of services. It is a clever instrument, to be sure, but we are, gratifyingly, not deluded.
Lawyers have a special talent to disguise the real intention of the parties in a contract to
make it come ostensibly within the provisions of a law although the real if furtive purpose
is to violate it. That talent has been exercised in this case, but not convincingly enough.

It should be quite clear, from the adroit way the contract has been drafted, that the primary
objective was to avoid the conclusion that PCSO will be operating a lottery "in association,
collaboration or joint venture with any person, association, company or entity," which is
prohibited by Section 1 of Rep. Act No. 1169 as amended by B.P. Blg. 42. Citing the self-
serving provisions of the contract, the respondents would have us believe that the
contract is perfectly lawful because all it does is provide for the lease to PCSO of the
technical know-how and equipment of PGMC, with PCSO acting as "the sole and
individual operator" of the lottery. I am glad we are not succumbing to this sophistry.

Despite the artfulness of the contract (authorship of which was pointedly denied by both
counsel for the government and the private respondent during the oral argument on this
case), a careful study will reveal telling stipulations that it is PGMC and not PCSO that
will actually be operating the lottery. Thus, it is provided inter alia that PGMC shall furnish
all capital equipment and other facilities needed for the operation; bear all expenses
relating to the operation, including those for the salaries and wages of the administrative
and technical personnel; undertake a positive advertising and promotion campaign for
public support of the lottery; establish a radio communications network throughout the
country as part of the operation; and assume all risks if the revenues from ticket sales are
insufficient to pay the entire prize money. Most significantly, to show that it is only after
eight years from the effectivity of the contract that PCSO will actually operate the lottery,
Par. 6.7 of the agreement provides that PGMC shall:

6.7. Upon effectivity of this Contract, commence the training of PCSO and
other local personnel and the transfer of technology and expertise, such
that at the end of the term of this Contract, PCSO will be able to effectively
take-over the Facilities and efficiently operate the On-Line Lottery System.
(Emphasis supplied).

In the meantime, that is to say during the entire 8-year term of the contract, it will be
PGMC that will be operating the lottery. Only "at the end of the term of this Contract" will
PCSO "be able to effectively take-over the Facilities and efficiently operate the On-Line
Lottery System."

Even on the assumption that it is PCSO that will be operating the lottery at the very start,
the authority granted to PGMC by the agreement will readily show that PCSO will not be
acting alone, as the respondents pretend. In fact, it cannot. PGMC is an indispensable
co-worker because it has the equipment and the technology and the management skills
that PCSO does not have at this time for the operation of the lottery, PCSO cannot deny
that it needs the assistance of PGMC for this purpose, which was its reason for entering
into the contract in the first place.

And when PCSO does avail itself of such assistance, how will it be operating the lottery?
Undoubtedly, it will be doing so "in collaboration, association or joint venture" with PGMC,
which, let it be added, will not be serving as a mere "hired help" of PCSO subject to its
control. PGMC will be functioning independently in the discharge of its own assigned role
as stipulated in detail under the contract. PGMC is plainly a partner of PCSO in violation
of law, no matter how PGMC's assistance is called or the contract is denominated.

Even if it be conceded that the assistance partakes of a lease of services, the undeniable
fact is that PCSO would still be collaborating or cooperating with PGMC in the operation
of the lottery. What is even worse is that PCSO and PGMC may be actually engaged in
a joint venture, considering that PGMC does not collect the usual fixed rentals due an
ordinary lessor but is entitled to a special "Rental Fee," as the contract calls it, "equal to
four point nine percent (4.9%) of gross receipts from ticket sales."

The flexibility of this amount is significant. As may be expected, it will induce in PGMC an
active interest and participation in the success of PCSO that is not expected of an ordinary
detached lessor who gets to be paid his rentals not a rental fee whether the lessee's
business prospers or not. PGMC's share in the operation depends on its own
performance and the effectiveness of its collaboration with PCSO. Although the contract
pretends otherwise, PGMC is a co-investor with PCSO in what is practically, if not in a
strictly legal sense, a joint venture.

Concerning the doctrine of locus standi, I cannot agree that out of the sixty million Filipinos
affected by the proposed lottery, not a single solitary citizen can question the
agreement. Locus standi is not such an absolute rule that it cannot admit of exceptions
under certain conditions or circumstances like those attending this transaction. As I
remarked in my dissent in Guazon v. De Villa, 181 SCRA 623, "It is not only the owner of
the burning house who has the right to call the firemen. Every one has the right
and responsibility to prevent the fire from spreading even if he lives in the other block."

What is especially galling is that the transaction in question would foist upon our people
an essentially immoral activity through the instrumentality of a foreign corporation, which
naturally does not have the same concern for our interests as we ourselves have. I am
distressed that foreigners should be allowed to exploit the weakness of some of us for
instant gain without work, and with the active collaboration and encouragement of our
own government at that.

Feliciano, J., concurring

I agree with the conclusions reached by my distinguished brother in the Court Davide, Jr.,
J., both in respect of the question of locus standi and in respect of the merits of this case,
that is, the issues of legality and constitutionality of the Contract of Lease entered into
between the Philippine Charity Sweepstakes Office (PCSO) and the Philippine Gaming
Management Corporation (PGMC).

In this separate opinion, I propose to address only the question of locus standi. It is with
some hesitation that I do so, considering the extensive separate opinions on this question
written by my learned brothers Melo, Puno and Vitug, JJ. I agree with the great deal of
what my brothers Melo, Puno and Vitug say about locus standi in their separate opinions
and there is no need to go over the ground that I share with them. Because, however, I
reach a different conclusion in respect of the presence or absence of locus standi on the
part of the petitioners in the case before the Court, there is an internal need (a need
internal to myself) to articulate the considerations which led me to that conclusion.

There is no dispute that the doctrine of locus standi reflects an important constitutional
principle, that is, the principle of separation of powers which, among other things,
mandates that each of the great Departments of government is responsible for
performance of its constitutionally allotted tasks. Insofar as the Judicial Department is
concerned, the exercise of judicial power and carrying out of judicial functions commonly
take place within the context of actual cases or controversies. This, in turn, reflects the
basic notion of judicial power as the power to resolve actual disputes and of the traditional
business of courts as the hearing and deciding of specific controversies brought before
them. In our own jurisdiction, and at least since the turn of the present century, judicial
power has always included the power of judicial review, understood as the authority of
courts (more specifically the Supreme Court) to assay contested legislative and executive
acts in terms of their constitutionality or legality. Thus, the general proposition has been
that a petitioner who assails the legal or constitutional quality of an executive or legislative
act must be able to show that he has locus standi. Otherwise, the petition becomes
vulnerable to prompt dismissal by the court.

There is, upon the other hand, little substantive dispute that the possession of locus
standi 1 is not, in each and every case, a rigid and absolute requirement for access to the
courts. Certainly that is the case where great issues of public law are at stake, issues
which cannot be approached in the same way that a court approaches a suit for the
collection of a sum of money or a complaint for the recovery of possession of a particular
piece of land. The broad question is when, or in what types of cases, the court should
insist on a clear showing of locus standiunderstood as a direct and personal interest in
the subject matter of the case at bar, and when the court may or should relax that
apparently stringent requirement and proceed to deal with the legal or constitutional
issues at stake in a particular case.

I submit, with respect, that it is not enough for the Court simply to invoke "public interest"
or even "paramount considerations of national interest," and to say that the specific
requirements of such public interest can only be ascertained on a "case to case" basis.
For one thing, such an approach is not intellectually satisfying. For another, such an
answer appears to come too close to saying that locus standi exists whenever at least a
majority of the Members of this Court participating in a case feel that an appropriate case
for judicial intervention has arisen.

This is not, however, to say that there is somewhere an over-arching juridical principle or
theory, waiting to be discovered, that permits a ready answer to the question of when, or
in what types of cases, the need to show locus standi may be relaxed in greater or lesser
degree. To my knowledge, no satisfactory principle or theory has been discovered and
none has been crafted, whether in our jurisdiction or in the United States. 2 I have neither
the competence nor the opportunity to try to craft such principle or formula. It might,
however, be useful to attempt to indicate the considerations of principle which, in the
present case, appear to me to require an affirmative answer to the question of whether
or not petitioners are properly regarded as imbued with the standing necessary to bring
and maintain the present petition.

Firstly, the character of the funds or other assets involved in the case is of major
importance. In the case presently before the Court, the funds involved are clearly public
in nature. The funds to be generated by the proposed lottery are to be raised from the
population at large. Should the proposed operation be as successful as its proponents
project, those funds will come from well-nigh every town and barrio of Luzon. The funds
here involved are public in another very real sense: they will belong to the PCSO, a
government owned or controlled corporation and an instrumentality of the government
and are destined for utilization in social development projects which, at least in principle,
are designed to benefit the general public. My learned brothers Melo, Puno and Vitug, JJ.
concede that taxpayers' suits have been recognized as an exception to the traditional
requirement of recognized as an exception to the traditional requirement of locus standi.
They insist, however, that because the funds here involved will not have been generated
by the exercise of the taxing power of the Government, the present petition cannot be
regarded as a taxpayer's suit and therefore, must be dismissed by the Court. It is my
respectful submission that that constitutes much too narrow a conception of the taxpayer's
suit and of the public policy that it embodies. It is also to overlook the fact that tax monies,
strictly so called, constitute only one (1) of the major categories of funds today raised and
used for public purposes. It is widely known that the principal sources of funding for
government operations today include, not just taxes and customs duties, but also
revenues derived from activities of the Philippine Amusement Gaming Corporation
(PAGCOR), as well as the proceeds of privatization of government owned or controlled
corporations and other government owned assets. The interest of a private citizen in
seeing to it that public funds, from whatever source they may have been derived, go only
to the uses directed and permitted by law is as real and personal and substantial as the
interest of a private taxpayer in seeing to it that tax monies are not intercepted on their
way to the public treasury or otherwise diverted from uses prescribed or allowed by law.
It is also pertinent to note that the more successful the government is in raising revenues
by non-traditional methods such as PAGCOR operations and privatization measures, the
lesser will be the pressure upon the traditional sources of public revenues, i.e., the pocket
books of individual taxpayers and importers.

A second factor of high relevance is the presence of a clear case of disregard of a

constitutional or statutory prohibition by the public respondent agency or instrumentality
of the government. A showing that a constitutional or legal provision is patently being
disregarded by the agency or instrumentality whose act is being assailed, can scarcely
be disregarded by court. The concept of locus standi which is part and parcel of the
broader notion of ripeness of the case "does not operate independently and is not
alone decisive. . . . [I]t is in substantial part a function of a judge's estimate of the merits
of the constitutional [or legal] issue." 3 The notion of locus standi and the judge's
conclusions about the merits of the case, in other words, interact with each other. Where
the Court perceives a serious issue of violation of some constitutional or statutory
limitation, it will be much less difficult for the Court to find locus standi in the petitioner
and to confront the legal or constitutional issue. In the present case, the majority of the
Court considers that a very substantial showing has been made that the Contract of Lease
between the PCSO and the PGMC flies in the face of legal limitations.

A third consideration of importance in the present case is the lack of any other party with
a more direct and specific interest in raising the questions here being raised. Though a
public bidding was held, no losing or dissatisfied bidder has come before the Court. The
Office of the Ombudsman has not, to the knowledge of the Court, raised questions about
the legality or constitutionality of the Contract of Lease here involved. The National
Government itself, through the Office of the Solicitor General, is defending the PCSO
Contract (though it had not participated in the drafting thereof). In a situation like that here
obtaining, the submission may be made that the institution, so well known in corporation
law and practice, of the corporate stockholders' derivative suit furnishes an appropriate
analogy and that on the basis of such an analogy, a taxpayer's derivative suit should be
recognized as available.

The wide range of impact of the Contract of Lease here assailed and of its
implementation, constitutes still another consideration of significance. In the case at bar,
the agreement if implemented will be practically nationwide in its scope and reach (the
PCSO-PGMC Contract is limited in its application to the Island of Luzon; but if the PCSO
Contracts with the other two [2] private "gaming management" corporations in respect of
the Visayas and Mindanao are substantially similar to PCSO's Contract with PGMC, then
the Contract before us may be said to be national indeed in its implications and
consequences). Necessarily, the amounts of money expected to be raised by the
proposed activities of the PCSO and PGMC will be very substantial, probably in the
hundreds of millions of pesos. It is not easy to conceive of a contract with greater and
more far-reaching consequences, literally speaking, for the country than the Contract of
Lease here involved. Thus, the subject matter of the petition is not something that the
Court may casually pass over as unimportant and as not warranting the expenditure of
significant judicial resources.

In the examination of the various features of this case, the above considerations have
appeared to me to be important and as pressing for acceptance and exercise of
jurisdiction on the part of this Court. It is with these considerations in mind that I vote to
grant due course to the Petition and to hold that the Contract of Lease between the PCSO
and PGMC in its present form and content, and given the present state of the law, is
fatally defective.

PADILLA, J., concurring:

My views against gambling are a matter of judicial record. In Basco v. PAGCOR, (G.R.
No. 91649, 14 May 1991, 197 SCRA 52) I expressed these views in a separate opinion
where I was joined by that outstanding lady jurist, Mme. Justice A. Melencio-Herrera
whose incisive approach to legal problems is today missed in this Court. I reproduce here
those views because they are highly persuasive to the conclusions I reach in the present
controversy:

I concur in the result of the learned decision penned by my brother Mr.

Justice Paras. This means that I agree with the decision insofar as it holds
that the prohibition, control, and regulation of the entire activity known as
gambling properly pertain to "state policy." It is, therefore, the political
departments of government, namely, the legislative and the executive that
should decide on what government should do in the entire area of gambling,
and assume full responsibility to the people for such policy.

The courts, as the decision states, cannot inquire into the wisdom, morality
or expediency of policies adopted by the political departments of
government in areas which fall within their authority, except only when such
policies pose a clear and present danger to the life, liberty or property of the
individual. This case does not involve such a factual situation.

However, I hasten to make of record that I do not subscribe to gambling in

any form. It demeans the human personality, destroys self-confidence and
eviscerates one's self-respect, which in the long run will corrode whatever
is left of the Filipino moral character. Gambling has wrecked and will
continue to wreck families and homes; it is an antithesis to individual
reliance and reliability as well as personal industry which are the
touchstones of real economic progress and national development.

Gambling is reprehensible whether maintained by government or privatized.

The revenues realized by the government out of "legalized" gambling will,
in the long run, be more than offset and negated by the irreparable damage
to the people's moral values.

Also, the moral standing of the government in its repeated avowals against
"illegal gambling" is fatally flawed and becomes untenable when it itself
engages in the very activity it seeks to eradicate.
 One can go through the Court's decision today and mentally replace the
activity referred to therein as gambling, which is legal only because it is
authorized by law and run by the government, with the activity known
as prostitution. Would prostitution be any less reprehensible were it to be
authorized by law, franchised, and "regulated" by the government, in return
for the substantial revenues it would yield the government to carry out its
laudable projects, such as infrastructure and social amelioration? The
question, I believe, answers itself. I submit that the sooner the legislative
department outlaws all forms of gambling, as a fundamental state policy,
and the sooner the executive implements such policy, the better it will be
for the nation.

We presently have the sweepstakes lotteries; we already have the PAGCOR's gambling
casinos; the Filipino people will soon, if plans do not miscarry, be initiated into an even
more sophisticated and encompassing nationwide gambling network known as the "on-
line hi-tech lotto system." To be sure, it is not wealth producing; it is not export oriented.
It will draw from existing wealth in the hands of Filipinos and transfer it into the coffers of
the PCSO and its foreign partners at a price of further debasement of the moral standards
of the Filipino people, the bulk of whom are barely subsisting below the poverty line.

1. It is said that petitioners 1 have no locus standi to bring this suit even as
they challenge the legality and constitutionality of a contract of lease
between the PCSO, a government-owned corporation and the PGMC, a
private corporation with substantial (if not controlling) foreign composition
and content. Such contract of lease contains the terms and conditions under
which an "on-line hi-tech lotto system" will operate in the country.

As the ponente of the extended, unsigned en banc resolution in Valmonte v. PCSO,

(G.R. No. 78716 and G.R. No. 79084, 22 September 1987), I would be the last to
downgrade the rule, therein reiterated, that in order to maintain a suit challenging the
constitutionality and/or legality of a statute, order or regulation or assailing a particular
governmental action as done with grave abuse of discretion or with lack of jurisdiction,
the petitioner must show that he has a clear personal or legal right that would be violated
with the enforcement of the challenged statute, order or regulation or the implementation
of the questioned governmental action. But, in my considered view, this rule maybe (and
should be) relaxed when the issue involved or raised in the petition is of such paramount
national interest and importance as to dwarf the above procedural rule into a barren
technicality. As a unanimous Court en banc aptly put it in De Guia vs. COMELEC, G.R.
No. 104712, 6 May 1992, 208 SCRA 420.

Before addressing the crux of the controversy, the Court observes that
petitioner does not allege that he is running for re-election, much less, that
he is prejudiced by the election, by district, in Paraaque. As such, he does
not appear to have locus standi, a standing in law, a personal or substantial
interest. (Sanidad vs. COMELEC, G.R. No. L-4640, October 12, 1976. 73
SCRA 333; Municipality of Malabang vs. Benito, G.R. No. L-28113, March
28, 1969, 27 SCRA 533) He does not also allege any legal right that has
been violated by respondent. If for this alone, petitioner does not appear to
have any cause of action.

However, considering the importance of the issue involved, concerning as

it does the political exercise of qualified voters affected by the
apportionment, and petitioner alleging abuse of discretion and violation of
the Constitution by respondent, We resolved to brush aside the question of
procedural infirmity, even as We perceive the petition to be one of
declaratory relief. We so held similarly through Mr. Justice Edgardo L. Paras
in Osmea vs. Commission on Elections.

I view the present case as falling within the De Guia case doctrine. For, when the contract
of lease in question seeks to establish and operate a nationwide gambling network with
substantial if not controlling foreign participation, then the issue is of paramount national
interest and importance as to justify and warrant a relaxation of the above-mentioned
procedural rule on locus standi.
 2. The charter of the PCSO Republic Act No. 1169 as amended by BP
No. 42 insofar as relevant, reads:

Sec. 1. The Philippine Charity Sweepstakes Office. The Philippine

Charity Sweepstakes Office, hereinafter designated the Office, shall be the
principal government agency for raising and providing for funds for health
programs, medical assistance and services and charities of national
character, and as such shall have the general powers conferred in section
thirteen of Act Numbered One Thousand Four Hundred Fifty-Nine, as
amended, and shall have the authority:

A. To hold and conduct charity sweepstakes races, lotteries and other

similar activities, in such frequency and manner, as shall be determined,
and subject to such rules and regulations as shall be promulgated by the
Board of Directors.

B. Subject to the approval of the Minister of Human Settlements, to engage

in health and welfare-related investments, programs, projects and activities
which may be profit-oriented, by itself or in collaboration, association or joint
venture with any person, association, company or entity, whether domestic
or foreign, except for the activities mentioned in the preceding paragraph
(A), for the purpose of providing for permanent and continuing sources of
funds for health programs, including the expansion of existing ones, medical
assistance and services, and/or charitable grants: Provided, That such
investments will not compete with the private sector in areas where
investments are adequate as may be determined by the National Economic
and Development Authority.

It is at once clear from the foregoing legal provisions that, while the PCSO charter allows
the PCSO to itself engage in lotteries, it does not however permit the PCSO to undertake
or engage in lotteries in "collaboration, association or joint venture" with others. The
palpable reason for this prohibition is, that PCSO should not and cannot be made a
vehicle for an otherwise prohibited foreign or domestic entity to engage in lotteries
(gambling activities) in the Philippines.

The core question then is whether the lease contract between PCSO and PGMC is a
device whereby PCSO will engage in lottery in collaboration, association or joint venture
with another, i.e. PGMC. I need not go here into the details and different specific features
of the contract to show that it is a joint venture between PCSO and PGMC. That has been
taken care of in the opinion of Mr. Justice Davide to which I fully subscribe.

On a slightly different plane and, perhaps simplified, I consider the agreement or

arrangement between the PCSO and PGMC a joint venture because each party to the
contract contributes its share in the enterprise or project. PGMC contributes its facilities,
equipment and know-how (expertise). PCSO contributes (aside from its charter) the
market, directly or through dealers and this to me is most important in the totality or
mass of the Filipinogambling elements who will invest in lotto tickets. PGMC will get its
4.9% of gross receipts (with assumption of certain risks in the course of lotto operations);
the residue of the whole exercise will go to PCSO. To any person with a minimum of
business know-how, this is a joint venture between PCSO and PGMC, plain and simple.

But assuming ex gratia argumenti that such arrangement between PCSO and PGMC is
not a joint venture between the two of them to install and operate an "on-line hi-tech lotto
system" in the country, it can hardly be denied that it is, at the very least, an association
or collaboration between PCSO and PGMC. For one cannot do without the other in the
installation, operation and, most importantly, marketing of the entire enterprise or project
in this country.

Indeed, the contract of lease in question is a clear violation of Republic Act No. 1169 as
amended by BP No. 42 (the PCSO charter).

Having arrived at the conclusion that the contract of lease in question between the PCSO
and PGMC is illegal and, therefore, invalid, I find it unnecessary to dwell on the other
issues raised in the pleadings and arguments of the parties.
I, therefore, vote to give DUE COURSE to the petition and to declare the contract of lease
in question between PCSO and PGMC, for the reasons aforestated, of no force and effect.

MELO, J., dissenting:

I submit that the petition before the Court deserves no less than outright dismissal for the
reason that petitioners, as concerned citizens and as taxpayers and as members of
Congress, do not possess the necessary legal standing to assail the validity of the
contract of lease entered into by the Philippine Charity Sweepstakes Office and the
Philippine Gaming Management Corporation relative to the establishment and operation
of an "On-line Hi-Tech Lottery System" in the country.

As announced in Lamb vs. Phipps (22 Phil. [1912], 559), "[J]udicial power in its nature, is
the power to hear and decide causes pending between parties who have the right to
sue and be sued in the courts of law and equity." Necessarily, this implies that a party
must show a personal stake in the outcome of the controversy or an injury to himself that
can be addressed by a favorable decision so as to warrant his invocation of the court's
jurisdiction and to justify the court's remedial powers in his behalf (Warth vs. Seldin, 422
U.S. 490; Guzman vs. Marrero, 180 U.S. 81; McMicken vs. United States, 97 U.S. 204).
Here, we have yet to see any of petitioners acquiring a personal stake in the outcome of
the controversy or being placed in a situation whereby injury may be sustained if the
contract of lease in question is implemented. It may be that the contract has somehow
evoked public interest which petitioners claim to represent. But the alleged public interest
which they pretend to represent is not only broad and encompassing but also strikingly
and veritably indeterminate that one cannot truly say whether a handful of the public, like
herein petitioners, may lay a valid claim of representation in behalf of the millions of
citizens spread all over the land who may have just as many varied reactions relative to
the contract in question.

Any effort to infuse personality on petitioners by considering the present case as a

"taxpayer's suit" could not cure the lack of locus standi on the part of petitioners. As
understood in this jurisdiction, a "taxpayer's suit" refers to a case where the act
complained of directly involves the illegal disbursement of public funds derived from
taxation (Pascual vs. Secretary of Public Works, 110 Phil. [1960] 331; Maceda vs.
Macaraig, 197 SCRA [1991]; Lozada vs. COMELEC, 120 SCRA [1983] 337; Dumlao vs.
COMELEC, 95 SCRA [1980] 392; Gonzales vs. Marcos, 65 SCRA [1975] 624). It cannot
be overstressed that no public fund raised by taxation is involved in this case. In fact, it is
even doubtful if the rentals which the PCSO will pay to the lessor for its operation of the
lottery system may be regarded as "public fund". The PCSO is not a revenue- collecting
arm of the government. Income or money realized by it from its operations will not and
need not be turned over to the National Treasury. Rather, this will constitute corporate
funds which will remain with the corporation to finance its various activities as authorized
in its charter. And if ever some semblance of "public character" may be said to attach to
its earnings, it is simply because PCSO is a government-owned or controlled entity and
not a purely private enterprise.

It must be conceded though that a "taxpayer's suit" had been allowed in a number of
instances in this jurisdiction. For sure, after the trial was blazed by Pascual vs. Secretary
of Public Works, supra, several more followed. It is to be noted, however, that in those
occasions where this Court allowed such a suit, the case invariably involved either the
constitutionality of a statute or the legality of the disbursement of public funds through the
enforcement of what was perceived to be an invalid or unconstitutional statute or
legislation (Pascual, supra; Philippine Constitution Association, Inc. vs. Jimenez, 15
SCRA [1965] 479; Philippine Constitution Association, Inc. vs. Mathay, 18 SCRA [1966]
300; Tolentino vs. COMELEC, 41 SCRA [1971] 702; Pelaez vs. Auditor General, 15
SCRA [1965] 569; Iloilo Palay and Corn Planters Association vs. Feliciano, 13 SCRA
[1965] 377).

The case before us is not a challenge to the validity of a statute or an attempt to restrain
expenditure of public funds pursuant to an alleged invalid congressional enactment. What
petitioners ask us to do is to nullify a simple contract of lease entered into by a
government-owned corporation with a private entity. That contract, as earlier pointed out,
does not involve the disbursement of public funds but of strictly corporate money. If every
taxpayer, claiming to have interest in the contract, no matter how remote, could come to
this Court and seek nullification of said contract, the day may come when the activities of
government corporate entities will ground to a standstill on account of nuisance suits filed
against them by persons whose supposed interest in the contract is as remote and as
obscure as the interest of any man in the street. The dangers attendant thereto are not
hard to discern and this Court must not allow them to come to pass.

One final observation must be emphasized. When the petition at bench was filed, the
Court decided to hear the case on oral argument on the initial perception that a
constitutional issue could be involved. However, it now appears that no question of
constitutional dimension is at stake as indeed the majority barely touches on such an
issue, concentrating as it does on its interpretation of the contract between the Philippine
Charity Sweepstakes Office and the Philippine Gaming Management Corporation.

I, therefore, vote to dismiss the petition.

PUNO, J., dissenting:

At the outset, let me state that my religious faith and family upbringing compel me to
regard gambling, regardless of its garb, with hostile eyes. Such antagonism tempts me to
view the case at bench as a struggle between good and evil, a fight between the forces
of light against the forces of darkness. I will not, however, yield to that temptation for we
are not judges of the Old Testament type who were not only arbiters of law but were also
high priests of morality.

I will therefore strictly confine the peregrinations of my mind to the legal issues for
resolution: (1) whether or not the petitioners have the Locus standi to file the petition at
bench; and (2) assuming their locus standi, whether or not the Contract of Lease between
PCSO and PGMC is null and void considering: (a) section 1 of R.A. No. 1169, as
amended by B.P. Blg. 42 (Charter of PCSO) which prohibits PCSO from holding and
conducting lotteries "in collaboration, association or joint venture with any person,
association, company or entity"; (b) Act No. 3836 which requires a congressional
franchise before any person or entity can establish and operate a telecommunication
system; (c) section 11, Art. XII of the Constitution, which requires that for a corporation to
operate a public utility, at least 60% of its capital must be owned by Filipino citizens; and
(d) R.A. No. 7042, otherwise known as the "Foreign Investments Act", which includes all
forms of gambling in its "negative list."

While the legal issues abound, I deferentially submit that the threshold issue is the locus
standi, or standing to sue, of petitioners. The petition describes petitioner Kilosbayan,
Inc., as a non-stock corporation composed of "civic spirited citizens, pastors, priests,
nuns, and lay leaders who are committed to the cause of truth, justice, and national
renewal." 1 Petitioners Jovito R. Salonga, Cirilo A. Rigos, Ernie Camba, Emilio C.
Capulong, Jr., Jose Abcede, Christine Tan, Felipe L. Gozon, Rafael G. Fernando, Raoul
V. Victorino, Jose Cunanan, and Quintin S. Doromal joined the petition in their capacity
as trustees of Kilosbayan, Inc., and as taxpayers and concerned citizens. 2 Petitioners
Freddie Webb and Wigberto Taada joined the petition as senators, taxpayers and
concerned citizens. 3 Petitioner Joker P. Arroyo joined the petition as a member of the
House of Representative, a taxpayer and a concerned citizen. 4

With due respect to the majority opinion, I wish to focus on the interstices of locus standi,
a concept described by Prof. Paul Freund as "among the most amorphous in the entire
domain of public law." The requirement of standing to sue inheres from the definition of
judicial power. It is not merely a technical rule of procedure which we are at liberty to
disregard. Section 1, Article VIII of the Constitution provides:

xxx xxx xxx

Judicial power includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been a grave abuse
of discretion amounting to lack or excess of jurisdiction on the part of any
branch or instrumentality of the Government. (Italics supplied)

The phrase "actual controversies involving rights which are legally demandable and
enforceable" has acquired a cultivated meaning given by courts. It spells out the
requirements that must be satisfied before one can come to court to litigate a
constitutional issue. Our distinguished colleague, Mr. Justice Isagani A. Cruz, gives a
shorthand summary of these requirements when he states that no constitutional question
will be heard and decided by courts unless there is a showing of the following: . . . (1)
there must be an actual case or controversy; (2) the question of constitutionality must be
raised by the proper party; (3) the constitutional question must be raised at the earliest
possible opportunity; and (4) the decision of the constitutional question must be
necessary to the determination of the case itself. 5

The complexion of the rule on locus standi has been undergoing a change. Mr. Justice
Cruz has observed the continuing relaxation of the rule on
standing, 6 thus:

xxx xxx xxx

A proper party is one who has sustained or is in immediate danger of

sustaining an injury as a result of the act complained of. Until and unless
such actual or potential injury is established, the complainant cannot have
the legal personality to raise the constitutional question.

In Tileson v. Ullmann, a physician questioned the constitutionality of a law

prohibiting the use of contraceptives, upon the ground that it might prove
dangerous to the life or health of some of his patients whose physical
condition would not enable them to bear the rigors of childbirth. The court
dismissed the challenge, holding that the patients of the physician and not
the physician himself were the proper parties.

In Cuyegkeng v. Cruz, the petitioner challenged in a quo

warranto proceeding the title of the respondent who, he claimed, had been
appointed to the board of medical examiners in violation of the provisions
of the Medical Act of 1959. The Supreme Court dismissed the petition,
holding that Cuyegkeng had not made a claim to the position held by Cruz
and therefore could not be regarded as a proper party who had sustained
an injury as a result of the questioned act.
In People v. Vera, it was held that the Government of the Philippines was a
proper party to challenge the constitutionality of the Probation Act because,
more than any other, it was the government itself that should be concerned
over the validity of its own laws.

In Ex Parte Levitt, the petitioner, an American taxpayer and member of the

bar, filed a motion for leave to question the qualifications of Justice Black
who, he averred, had been appointed to the U.S. Supreme Court in violation
of the Constitution of the United States. The Court dismissed the petition,
holding that Levitt was not a proper party since he was not claiming the
position held by Justice Black.

The rule before was that an ordinary taxpayer did not have the proper party
personality to question the legality of an appropriation law since his interest
in the sum appropriated was not substantial enough. Thus, in Custodio v.
Senate President, a challenge by an ordinary taxpayer to the validity of a
law granting back pay to government officials, including members of
Congress, during the period corresponding to the Japanese Occupation
was dismissed as having been commenced by one who was not a proper
party.

Since the first Emergency Powers Cases, however, the rule has been
changed and it is now permissible for an ordinary taxpayer, or a group of
taxpayers, to raise the question of the validity of an appropriation law. As
the Supreme Court then put it. "The transcendental importance to the public
of these cases demands that they be settled promptly and definitely,
brushing aside, if we must, technicalities of procedure."

In Tolentino v. Commission on Elections, it was held that a senator had the

proper party personality to seek the prohibition of a plebiscite for the
ratification of a proposed constitutional amendment. In PHILCONSA v.
Jimenez, an organization of taxpayers and citizens was held to be a proper
party to question the constitutionality of a law providing for special
retirement benefits for members of the legislature.

In Sanidad v. Commission on Elections, the Supreme Court upheld the

petitioners as proper parties, thus

As a preliminary resolution, We rule that the petitioners in L-

44640 (Pablo C. Sanidad and Pablito V. Sanidad)
possess locus standi to challenge the constitutional premise
of Presidential Decree Nos. 991, 1031, and 1033. It is now an
ancient rule that the valid source of a statute Presidential
Decrees are of such nature may be contested by one who
will sustain a direct injury as a result of its enforcement. At the
instance of taxpayers, laws providing for the disbursement of
public funds may be enjoined, upon the theory that the
expenditure of public funds by an officer of the State for the
purpose of executing an unconstitutional act constitutes a
misapplication of such funds. The breadth of Presidential
Decree No. 991 carries an appropriation of Five Million Pesos
for the effective implementation of its purposes. Presidential
Decree No. 1031 appropriates the sum of Eight Million Pesos
to carry out its provisions. The interest of the aforenamed
petitioners as taxpayers in the lawful expenditure of these
amounts of public money sufficiently clothes them with that
personality to litigate the validity of the Decrees appropriating
said funds. Moreover, as regard taxpayer's suits, this Court
enjoys that open discretion to entertain the same or not. For
the present case, We deem it sound to exercise that discretion
affirmatively so that the authority upon which the disputed
Decrees are predicated may be inquired into.
 In Lozada v. Commission on Elections, however, the petitioners were held
without legal standing to demand the filling of vacancies in the legislature
because they had only "a generalized interest' shared with the rest of the
citizenry."

Last July 30, 1993, we further relaxed the rule on standing in Oposa, et al. v. Hon.
Fulgencio S. Factoran, Jr., 7where we recognized the locus standi of minors representing
themselves as well as generations unborn to protect their constitutional right to a
balanced and healthful ecology.

I am perfectly at peace with the drift of our decisions liberalizing the rule on locus standi.
The once stubborn disinclination to decide constitutional issues due to lack of locus
standi is incompatible with the expansion of judicial power mandated in section 1 of Article
VIII of the Constitution, i.e., "to determine whether or not there has been a grave abuse
of discretion, amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the government." As we held thru the ground breaking ponencia of Mr.
Justice Cruz in Daza v. Singson, 8 this provision no longer precludes the Court from
resolving political questions in proper cases. But even perusing this provision as a
constitutional warrant for the court to enter the once forbidden political thicket, it is clear
that the requirement of locus standi has not been jettisoned by the Constitution for it still
commands courts in no uncertain terms to settle only "actual controversies involving
rights which are legally demandable and enforceable." Stated otherwise, courts are
neither free to decide all kinds of cases dumped into their laps nor are they free to open
their doors to all parties or entities claiming a grievance. The rationale for this
constitutional requirement of locus standi is by no means trifle. It is intended "to assure a
vigorous adversary presentation of the case, and, perhaps more importantly to warrant
the judiciary's overruling the determination of a coordinate, democratically elected organ
of government." 9 It thus goes to the very essence of representative democracies. As Mr.
Justice Powell carefully explained in U.S. v.
Richardson, 10 viz:
Relaxation of standing requirements is directly related to the expansion of
judicial power. It seems to me inescapable that allowing unrestricted
taxpayer or citizen standing would significantly alter the allocation of power
at the national level, with a shift away from a democratic form of
government. I also believe that repeated and essentially head-on
confrontations between the life-tenured branch and the representative
branches of government will not, in the long run, be beneficial to either. The
public confidence essential to the former and the vitality critical to the latter
may well erode if we do not exercise self- restraint in the utilization of our
power to negative the actions of the other branches. We should be ever
mindful of the contradictions that would arise if a democracy were to permit
at large oversight of the elected branches of government by a non-
representative, and in large measure insulated, judicial branch. Moreover,
the argument that the Court should allow unrestricted taxpayer or citizen
standing underestimates the ability of the representative branches of the
Federal Government to respond to the citizen pressure that has been
responsible in large measure for the current drift toward expanded standing.
Indeed, taxpayer or citizen advocacy, given its potentially broad base, is
precisely the type of leverage that in a democracy ought to be employed
against the branches that were intended to be responsive to public attitudes
about the appropriate operation of government. "We must as judges recall
that, as Mr. Justice Holmes wisely observed, the other branches of
Government are ultimate guardians of the liberties and welfare of the people
in quite as great a degree as the courts."

Unrestrained standing in federal taxpayer or citizen suits would create a

remarkably illogical system of judicial supervision of the coordinate
branches of the Federal Government. Randolph's proposed Council of
Revision, which was repeatedly rejected by the Framers, at least had the
virtue of being systematic; every law passed by the legislature automatically
would have been previewed by the judiciary before the law could take effect.
 On the other hand, since the judiciary cannot select the taxpayers or citizens
who bring suit or the nature of the suits, the allowance of public actions
would produce uneven and sporadic review, the quality of which would be
influenced by the resources and skill of the particular plaintiff. And issues
would be presented in abstract form, contrary to the Court's recognition that
"judicial review is effective largely because it is not available simply at the
behest of a partisan faction, but is exercised only to remedy a particular,
concrete injury." Sierra Club v. Morton, 405 U.S. 727, 740-741, n. 16 (1972).

A lesser but not insignificant reason for screening the standing of persons who desire to
litigate constitutional issues is economic in character. Given the sparseness of our
resources, the capacity of courts to render efficient judicial service to our people is
severely limited. For courts to indiscriminately open their doors to all types of suits and
suitors is for them to unduly overburden their dockets, and ultimately render themselves
ineffective dispensers of justice. To be sure, this is an evil that clearly confronts our
judiciary today.

Prescinding from these premises, and with great reluctance, I am not prepared to
concede the standing to sue of petitioners. On a personal level, they have not shown that
elemental injury in fact which will endow them with a standing to sue. It must be stressed
that petitioners are in the main, seeking the nullity not of a law but of a Contract of Lease.
Not one of the petitioners is a party to the Contract of Lease executed between PCSO
and PGMC. None of the petitioners participated in the bidding, and hence they are not
losing bidders. They are complete strangers to the contract. They stand neither to gain
nor to lose economically by its enforcement. It seems to me unusual that an unaffected
third party to a contract could be allowed to question its validity. Petitioner Kilosbayan
cannot justify this officious interference on the ground of its commitment to "truth, justice
and national renewal." Such commitment to truth, justice and national renewal, however
noble it may be, cannot give Kilosbayan a roving commission to check the validity of
contracts entered into by the government and its agencies. Kilosbayan is not a private
commission on audit.
Neither can I perceive how the other petitioners can be personally injured by the Contract
of Lease between PCSO and PGMC even if petitioner Salonga assails as unmitigated
fraud the statistical probability of winning the lotto as he compared it to the probability of
being struck twice by lightning. The reason is obvious: none of the petitioners will be
exposed to this alleged fraud for all of them profess to abjure playing the lotto. It is self-
evident that lotto cannot physically or spiritually injure him who does not indulge in it.

Petitioners also contend they have locus standi as taxpayers. But the case at bench does
not involve any expenditure of public money on the part of PCSO. In fact, paragraph 2 of
the Contract of Lease provides that it is PGMC that shall build, furnish, and maintain at
its own expense and risk the facilities for the On-Line Lottery System of PCSO and shall
bear all maintenance and other costs. Thus, PGMC alleged it has already spent P245M
in equipment and fixtures and would be investing close to P1 billion to supply adequately
the technology and other requirements of PCSO. 11 If no tax money is being illegally
deflected in the Contract of Lease between PCSO and PGMC, petitioners have no
standing to impugn its validity as taxpayers. Our ruling in Dumlao v. Comelec, 12 settled
this issue well enough, viz:

However, the statutory provisions questioned in this case, namely, sec. 7,

BP Blg. 51, and sections 4, 1, and 5 BP Blg. 52, do not directly involve the
disbursement of public funds. While, concededly, the elections to be held
involve the expenditure of public moneys, nowhere in their Petition do said
petitioners allege that their tax money is "being extracted and spent in
violation of specific constitutional protections against abuses of legislative
power" (Flast v. Cohen, 392 U.S. 83 [1960]), or that there is a misapplication
of such funds by respondent COMELEC (see Pascual vs. Secretary of
Public Works, 110 Phil. 331 [1960]), or that public money is being deflected
to any improper purpose. Neither do petitioners seek to restrain respondent
from wasting public funds through the enforcement of an invalid or
unconstitutional law. (Philippine Constitution Association vs. Mathay, 18
SCRA 300 [1966]), citing Philippine Constitution Association vs. Gimenez,
15 SCRA 479 [1965]). Besides, the institution of a taxpayer's suit, per se, is
 no assurance of judicial review. As held by this Court in Yan vs.
Macapagal(43 SCRA 677 [1972]), speaking through our present Chief
Justice, this Court is vested with discretion as to whether or not a taxpayer's
suit should be entertained.

Next, petitioners plead their standing as "concerned citizens." As citizens, petitioners are
pleading that they be allowed to advocate the constitutional rights of other persons who
are not before the court and whose protection is allegedly their concern. A
citizen qua citizen suit urges a greater relaxation of the rule on locus standi. I feel no
aversion to the further relaxation of the rule on standing to accommodate what in other
jurisdictions is known as an assertion of jus tertii in constitutional litigation provided the
claimant can demonstrate: (1) an injury in fact to himself, and (2) the need to prevent the
erosion of a preferred constitutional right of a third person. As stressed before, the first
requirement of injury in fact cannot be abandoned for it is an essential element for the
exercise of judicial power. Again, as stressed by Mr. Justice Powell, viz: 13

The revolution in standing doctrine that has occurred, particularly in the 12

years since Baker v. Carr, supra, has not meant, however, that standing
barriers have disappeared altogether. As the Court noted in Sierra Club,
"broadening the categories of injury that may be alleged in support of
standing is a different matter from abandoning the requirement that the
party seeking review must himself have suffered an injury." 405 U.S., at 738
. . . Indeed, despite the diminution of standing requirements in the last
decade, the Court has not broken with the traditional requirement that, in
the absence of a specific statutory grant of the right of review, a plaintiff
must allege some particularized injury that sets him apart from the man on
the street.

I recognize that the Court's allegiance to a requirement of particularized

injury has on occasion required a reading of the concept that threatens to
transform it beyond recognition. E.G., Baker v. Carr, supra; Flast v. Cohen,
supra. But despite such occasional digressions, the requirement remains,
 and I think it does so for the reasons outlined above. In recognition of those
considerations, we should refuse to go the last mile towards abolition of
standing requirements that is implicit in broadening the "precarious
opening" for federal taxpayers created by Flast, see 392 U.S., at 116 (Mr.
Justice Fortas, concurring) or in allowing a citizen qua citizen to invoke the
power of the federal courts to negative unconstitutional acts of the Federal
Government.

In sum, I believe we should limit the expansion of federal taxpayer and

citizen standing in the absence of specific statutory authorization to an outer
boundary drawn by the results in Flast and Baker v. Carr. I think we should
face up to the fact that all such suits are an effort "to employ a federal court
as a forum in which to air . . . generalized grievances about the conduct of
government or the allocation of power in the Federal System." Flast v.
Cohen, 392 U.S., at 106. The Court should explicitly reaffirm traditional
prudential barriers against such public actions. My reasons for this view are
rooted in respect for democratic processes and in the conviction that "[t]he
powers of the federal judiciary will be adequate for the great burdens placed
upon them only if they are employed prudently, with recognition of the
strengths as well as the hazards that go with our kind of representative
government." Id., at 131

The second requirement recognizes society's right in the protection of certain preferred
rights in the Constitution even when the rightholders are not before the court. The theory
is that their dilution has a substantial fall out detriment to the rights of others, hence the
latter can vindicate them.

In the case at bench, it is difficult to see how petitioners can satisfy these two
requirements to maintain a jus tertiiclaim. They claim violation of two constitutional
provisions, to wit:
 Section 1, Article XIII. The Congress shall give highest priority to the
enactment of measures that protect and enhance the right of all the people
to human dignity, reduce social, economic, and political inequalities, and
remove cultural inequities by equitably diffusing wealth and political power
for the common good.

To this end, the State shall regulate the acquisition, ownership, use, and
disposition of property and its increments.

and

Section 11, Article XII. - No franchise, certificate, or any other form of

authorization for the operation of a public utility shall be granted except to
citizens of the Philippines or to corporations or associations organized
under the laws of the Philippines at least sixty per centum of whose capital
is owned by such citizens, nor shall such franchise, certificate, or
authorizations be exclusive in character or for a longer period than fifty
years. Neither shall any such franchise or right be granted except under the
condition that it shall be subject to amendment, alteration, or repeal by the
Congress when the common good so requires. The State shall encourage
equity participation in public utilities by the general public. The participation
of foreign investors in the governing body of any public utility enterprise shall
be limited to their proportionate share in its capital, and all the executive
and managing officers of such corporation or association must be citizen of
the Philippines.

Section 1, Article XIII of the Constitution cannot be the matrix of petitioners' jus tertii claim
for it expresses no more than a policy direction to the legislative in the discharge of its
ordained duty to give highest priority to the enactment of measures that protect and
enhance the right of all the people to human dignity, reduce social, economic, and political
inequalities and remove cultural inequities by equitably diffusing wealth and political
power for the common good. Whether the act of the legislature in amending the charter
of PCSO by giving it the authority to conduct lotto and whether the Contract of Lease
entered into between PCSO and PGMC are incongruent to the policy direction of this
constitutional provision is a highly debatable proposition and can be endlessly argued.
Respondents steadfastly insist that the operation of lotto will increase the revenue base
of PCSO and enable government to provide a wider range of social services to the people.
They also allege that the operation of high-tech lotto will eradicate illegal jueteng.
Petitioners are scandalized by this submission. They dismiss gambling as evilper se and
castigate government for attempting to correct a wrong by committing another wrong. In
any event, the proper forum for this debate, however cerebrally exciting it may be, is not
this court but congress. So we held in PCSO v. Inopiquez, to wit: 14

By bringing their suit in the lower court, the private respondents in G.R. No.
79084 do not question the power of PCSO to conduct the Instant
Sweepstakes game. Rather, they assail the wisdom of embarking upon this
project because of their fear of the "pernicious repercussions" which may
be brought about by the Instant Sweepstakes Game which they have
labelled as "the worst form of gambling" which thus "affects the moral
values" of the people.

The Court, as held in several cases, does not pass upon questions of
wisdom, justice, or expediency of legislation and executive acts. It is not the
province of the courts to supervise legislation or executive orders as to keep
them within the bounds of propriety, moral values and common sense. That
is primarily and even exclusively a concern of the political departments of
the government; otherwise, there will be a violation of the principle of
separation of powers. (Italics supplied)

I am not also convinced that petitioners can justify their locus standi to advocate the rights
of hypothetical third parties not before the court by invoking the need to keep inviolate
section 11, Article XII of the Constitution which imposes a nationality requirement on
operators of a public utility. For even assuming arguendo that PGMC is a public utility,
still, the records do not at the moment bear out the claim of petitioners that PGMC is a
foreign owned and controlled corporation. This factual issue remains unsettled and is still
the subject of litigation by the parties in the Securities and Exchange Commission. We
are not at liberty to anticipate the verdict on this contested factual issue. But over and
above this consideration, I respectfully submit that this constitutional provision does not
confer on third parties any right of a preferred status comparable to the Bill of Rights
whose dilution will justify petitioners to vindicate them in behalf of its rightholders. The
legal right of hypothetical third parties they profess to advocate is to my mind too
impersonal, too unsubstantial, too indirect, too amorphous to justify their access to this
Court and the further lowering of the constitutional barrier of locus standi.

Again, with regret, I do not agree that the distinguished status of some of the petitioners
as lawmakers gives them the appropriate locus standi. I cannot perceive how their
constitutional rights and prerogatives as legislators can be adversely affected by the
contract in question. Their right to enact laws for the general conduct of our society
remains unimpaired and undiminished. 15 Their status as legislators, notwithstanding,
they have to demonstrate that the said contract has caused them to suffer a personal,
direct, and substantial injury in fact. They cannot simply advance a generic grievance in
common with the people in general.

I am not unaware of our ruling in De Guia v. Comelec, 16 viz:

Before addressing the crux of the controversy, the Court observes that
petitioner does not allege that he is running for reelection, much less, that
he is prejudiced by the election, by district, in Paraaque. As such, he does
not appear to have locus standi, a standing in law, a personal or substantial
interest. (Sanidad vs. COMELEC, G.R. No. L-44640, October 12, 1976, 73
SCRA 333; Municipality of Malabang vs. Benito, G.R. No. L-28113, March
28, 1969, 27 SCRA 533). He does not also allege any legal right that has
been violated by respondent. If for this alone, petitioner does not appear to
have any cause of action.
 However, considering the importance of the issue involved, concerning as
it does the political exercise of qualified voters affected by the
apportionment, and petitioner alleging abuse of discretion and violation of
the Constitution by respondent, We resolved to brush aside the question of
procedural infirmity, even as We perceive the petition to be one of
declaratory relief. We so held similarly through Mr. Justice Edgardo L. Paras
in Osmena vs. Commission on Elections.

It is my respectful submission, however, that we should re-examine de Guia. It treated

the rule on locus standi as a mere procedural rule. It is not a plain procedural rule but a
constitutional requirement derived from section 1, Article VIII of the Constitution which
mandates courts of justice to settle only "actual controversies involving rights which are
legally demandable and enforceable." The phrase has been construed since time
immemorial to mean that a party in a constitutional litigation must demonstrate a standing
to sue. By downgrading the requirement on locus standi as a procedural rule which can
be discarded in the name of public interest, we are in effect amending the Constitution by
judicial fiat.

De Guia would also brush aside the rule on locus standi if a case raises an important
issue. In this regard, I join the learned observation of Mr. Justice Feliciano: "that it is not
enough for the Court simply to invoke 'public interest' or even 'paramount considerations
of national interest,' and to say that the specific requirements of such public interest can
only be ascertained on a 'case to case' basis. For one thing, such an approach is not
intellectually satisfying. For another, such an answer appears to come too close to saying
that locus standi exists whenever at least a majority of the Members of this Court
participating in a case feel that an appropriate case for judicial intervention has arisen."

I also submit that de Guia failed to perceive that the rule on locus standi has little to do
with the issue posed in a case, however, important it may be. As well pointed out in Flast
v. Cohen: 17
 The fundamental aspect of standing is that it focuses on the party seeking
to get his complaint before a federal court and not on the issues he wishes
to have adjudicated. The "gist of the question of standing" is whether the
party seeking relief has "alleged such a personal stake in the outcome of
the controversy as to assure that concrete adverseness which sharpens the
presentation of issues upon which the court so largely depends for
illumination of difficult constitutional questions." Baker v. Carr,369 U.S. 186,
204 (1962). In other words, when standing is placed in issue in a case, the
question is whether the person whose standing is challenged is a proper
party to request an adjudication of a particular issue and not whether the
issue itself is justiciable. Thus, a party may have standing in a particular
case, but the federal court may nevertheless decline to pass on the merits
of the case because, for example, it presents a political question. A proper
party is demanded so that federal courts will not be asked to decide "ill-
defined controversies over constitutional issues," United public Workers v.
Mitchell, 330 U.S. 75, 90 (1947), or a case which is of "a hypothetical or
abstract character," Aetna Life Insurance Co. v. Haworth, 300 U.S. 227, 240
(1937).

It is plain to see that in de Guia, the court took an unorthodox posture, to say the least. It
held there was no proper party before it, and yet it resolved the issues posed by the
petition. As there was no proper party before the court, its decision is vulnerable to be
criticized as an advisory opinion.

With due respect, the majority decision appears to have set a dangerous precedent by
unduly trivializing the rule on locus standi. By its decision, the majority has entertained a
public action to annul a private contract. In so doing, the majority may have given sixty
(60) million Filipinos the standing to assail contracts of government and its agencies. This
is an invitation for chaos to visit our law on contract, and certainly will not sit well with
prospective foreign investors. Indeed, it is difficult to tread the path of the majority on this
significant issue. The majority granted locus standi to petitioners because of lack of any
other party with more direct and specific interest. But one has standing because he has
standing on his own and standing cannot be acquired because others with standing have
refused to come to court. The thesis is also floated that petitioners have standing as they
can be considered taxpayers with right to file derivative suit like a stockholder's derivative
suit in private corporations. The fact, however, is that PCSO is not a private but a quasi-
public corporation. Our law on private corporation categorically sanctions stockholder's
derivative suit. In contrast, our law on public corporation does not recognize this so-called
taxpayer's derivative suit. Hence, the idea of a taxpayer's derivative suit, while alluring,
has no legal warrant.

Our brethren in the majority have also taken the unprecedented step of striking down a
contrast at the importunings of strangers thereto, but without justifying the interposition of
judicial power on any felt need to prevent violation of an important constitutional provision.
The contract in question was voided on the sole ground that it violated an ordinary statute,
section 1 of R.A. 1169, as amended by B.P. Blg. 42. If there is no provision of the
Constitution that is involved in the case at bench, it boggles the mind how the majority
can invoke considerations of national interest to justify its abandonment of the rule
on locus standi. The volume of noise created by the case cannot magically convert it to a
case of paramount national importance. By its ruling, the majority has pushed the Court
in unchartered water bereft of any compass, and it may have foisted the false hope that
it is the repository of all remedies.

If I pay an unwavering reverence to the rule of locus standi, it is because I consider it as

a touchstone in maintaining the proper balance of power among the three branches of
our government. The survival of our democracy rests in a large measure on our ability to
maintain this delicate equipoise of powers. For this reason, I look at judicial review from
a distinct prism. I see it both as a power and a duty. It is a power because it enables the
judiciary to check excesses of the Executive and the Legislative. But, it is also a duty
because its requirement of locus standi, among others, Executive and the Legislative.
But, it is also a duty because its requirement of locus standi, among others, keeps the
judiciary from overreaching the powers of the other branches of government. By
balancing this duality, we are able to breathe life to the principle of separation of powers
and prevent tyranny. To be sure, it is our eternal concern to prevent tyranny but that
includes tyranny by ourselves. The Constitution did not install a government by the
judiciary, nay, not a government by the unelected. In offering this submission, I reject the
sublimal fear that an unyielding insistence on the rule on locus standi will weaken the
judiciary vis-a-vis the other branches of government. The hindsight of history ought to tell
us that it is not power per se that strengthens. Power unused is preferable than power
misused. We contribute to constitutionalism both by the use of our power to decide and
its non use. As well said, the cases we decide are as significant as the cases we do not
decide. Real power belongs to him who has power over power.

IN VIEW WHEREOF, and strictly on the ground of lack of locus standi on the part of
petitioners, I vote to DENY the petition.

VITUG, J., dissenting:

Judicial power encompasses both an authority and duty to resolve "actual controversies
involving rights which are legally demandable and enforceable" (Article VIII, Section 1,
1987 Constitution). As early as the case of Lamb vs. Phipps, 1 this Court ruled: "Judicial
power, in its nature, is the power to hear and decide causes pending between parties who
have the right to sue in the courts of law and equity." 2 An essential part of, and corollary
to, this principle is the locus standi of a party litigant, referring to one who is directly
affected by, and whose interest is immediate and substantial in, the controversy. The rule
requires that a party must show a personal stake in the outcome of the case or an injury
to himself that can be redressed by a favorable decision so as to warrant his invocation
of the court's jurisdiction and to justify the exercise of the court's remedial powers in his
behalf. 3 If it were otherwise, the exercise of that power can easily become too unwieldy
by its sheer magnitude and scope to a point that may, in no small degree, adversely affect
its intended essentiality, stability and consequentiality.

Locus standi, nevertheless, admits of the so-called "taxpayer's suit." Taxpayer's suits are
actions or proceedings initiated by one or more taxpayers in their own behalf or,
conjunctively, in representation of others similarly situated for the purpose of declaring
illegal or unauthorized certain acts of public officials which are claimed to be injurious to
their common interests as such taxpayers (Cf. 71 Am Jur 2d., 179-180). The principle is
predicated upon the theory that taxpayers are, in equity, the cestui que trust of tax funds,
and any illegal diminution thereof by public officials constitutes a breach of trust even as
it may result in an increased burden on taxpayers (Haddock vs. Board of Public
Education, 86 A 2d 157; Henderson vs. McCormick, 17 ALR 2d 470).

Justice Brandeis of the United States Supreme Court, in his concurring opinion
in Ashwander vs. Tennessee Valley Authority (297 U.S. 288), said:

. . . . The Court will not pass upon the validity of a statute upon complaint of
one who fails to show that he is injured by its operation. Tyler v. The
Judges, 179 U.S. 405; Hendrick v. Maryland, 234 U.S. 610, 621. Among the
many applications of this rule, none is more striking than the denial of the
right of challenge to one who lacks a personal or property right. Thus, the
challenge by a public official interested only in the performance of his official
duty will not be entertained. Columbus & Greenville Ry. v. Miller, 283 U.S.
96, 99-100. In Fairchild v. Hughes, 258 U.S. 126, the Court affirmed the
dismissal of a suit brought by a citizen who sought to have the Nineteenth
Amendment declared unconstitutional. InMassachusetts v. Mellon, 262
U.S. 447, the challenge of the federal Maternity Act was not entertained
although made by the Commonwealth on behalf of all its citizens."

Justice Brandeis' view, shared by Justice Frankfurter in Joint Anti-Fascist Refugee

Commission vs. McGrath (351 U.S. 123), was adopted by the U.S. Supreme Court in
Flast vs. Cohen (392 U.S. 83) which held that it is only when a litigant is able to show
such a personal stake in the controversy as to assure a concrete adverseness in the
issues submitted that legal standing can attach.

A "taxpayer's suit," enough to confer locus standi to a party, we have held before, is
understood to be a case where the act complained of directly involves the illegal
disbursement of public funds derived from taxation.4 It is not enough that the dispute
concerns public funds. A contrary rule could easily lead to a limitless application of the
term "taxpayer's suit," already by itself a broad concept, since a questioned act of
government would almost so invariably entail, as a practical matter, a financial burden of
some kind.

To be sure, serious doubts have even been raised on the propriety and feasibility of
unqualifiedly recognizing the "taxpayer's suit" as an exception from the standard rule of
requiring a party who invokes the exercise of judicial power to have a real and personal
interest or a direct injury in the outcome of a controversy. This Court has heretofore
spoken on the matter, at times even venturing beyond the usual understanding of its
applicability in the name of national or public interest. It is remarkable, nevertheless, that
the accepted connotation of locus standi has still managed to be the rule, sanctioning, by
way of exception, the so-called "taxpayer's suit" which courts accept on valid and
compelling reasons.

A provision which has been introduced by the 1987 Constitution is a definition, for the first
time in our fundamental law, of the term "judicial power," as such authority and duty of
courts of justice "to settle actual controversies involving rights which are legally
demandable and enforceable and to determine whether or not there has been a grave
abuse of discretion, amounting to lack or excess of jurisdiction, on the part of any branch
or instrumentality of the Government" (Article VIII, Section 1, Constitution). I take it that
the provision has not been intended to unduly mutate, let alone to disregard, the long
established rules on locus standi. Neither has it been meant, I most respectfully submit,
to do away with the principle of separation of powers and its essential incidents such as
by, in effect, conferring omnipotence on, or allowing an intrusion by, the courts in respect
to purely political decisions, the exercise of which is explicitly vested elsewhere, and
subordinate, to that of their own, the will of either the Legislative Department or the
Executive Department both co- equal, independent and coordinate branches, along
with the Judiciary, in our system of government. Again, if it were otherwise, there indeed
would be truth to the charge, in the words of some constitutionalists, that "judicial tyranny"
has been institutionalized by the 1987 Constitution, an apprehension which should, I
submit, rather be held far from truth and reality.
In sum, while any act of government, be it executive in nature or legislative in character,
may be struck down and declared a nullity either because it contravenes an express
provision of the Constitution or because it is perceived and found to be attended by or the
result of grave abuse of discretion, amounting to lack or excess of jurisdiction, that issue,
however, must first be raised in a proper judicial controversy. The Court's authority to look
into and grant relief in such cases would necessitate locus standi on the part of party
litigants. This requirement, in my considered view, is not merely procedural or technical
but goes into the essence of jurisdiction and the competence of courts to take cognizance
of justiciable disputes.

In Bugnay Construction and Development Corporation vs. Laron, 5 this Court ruled:

. . . . Considering the importance to the public of a suit assailing the

constitutionality of a tax law, and in keeping with the Court's duty, specially
explicated in the 1987 Constitution, to determine whether or not the other
branches of the Government have kept themselves within the limits of the
Constitution and the laws and that they have not abused the discretion given
to them, the Supreme Court may brush aside technicalities of procedure
and take cognizance of the suit. (Citing Kapatiran vs. Tan, G.R. No. 81311,
June 30, 1988.)

However, for the above rule to apply, it is exigent that the taxpayer-plaintiff
sufficiently show that he would be benefited or injured by the judgment or
entitled to the avails of the suit as a real party in interest. (Citing Estate of
George Litton vs. Mendoza, G.R. No. 49120, June 30, 1988.) Before he can
invoke the power of judicial review, he must specifically prove that he has
sufficient interest in preventing the illegal expenditure of money raised by
taxation (citing 11 Am. Jur. 761; Dumlao, et al. vs. Commission on
Elections, 95 SCRA 392) and that he will sustain a direct injury as a result
of the enforcement of the questioned statute or contract. (Citing Sanidad, et
al. vs. Commission on Elections, et al., 73 SCRA 333.) It is not sufficient
 that he has merely a general interest common to all members of the public.
(Citing Ex Parte Levitt, 302 U.S. 633, cited in 15 SCRA 497, Annotation.)

As so well pointed out by Mr. Justice Camilo D. Quiason during the Court's deliberations,
"due respect and proper regard for the rule on locus standi would preclude the rendition
of advisory opinions and other forms of pronouncement on abstract issues, avoid an
undue interference on matters which are not justiciable in nature and spare the Court
from getting itself involved in political imbroglio."

The words of Senate President Edgardo J. Angara, carry wisdom; we quote:

The powers of the political branches of our government over economic

policies is rather clear: the Congress is to set in broad but definite strokes
the legal framework and structures for economic development, while the
Executive provides the implementing details for realizing the economic ends
identified by Congress and executes the same.

xxx xxx xxx

If each economic decision made by the political branches of government,

particularly by the executive, are fully open to re-examination by the judicial
branch, then very little, if any, reliance can be placed by private economic
actors on those decisions. Investors would always have to factor in possible
costs arising from judicially-determined changes affecting their immediate
business, notwithstanding assurances by executive authorities.

Judicial decisions are, in addition, inflexible and can never substitute for
sound decision-making at the level of those who are assigned to execute
the laws of the land. Since judicial power cannot be exercised unless an
actual controversy is brought before the courts for resolution, decisions
cannot be properly modified unless another appropriate controversy arises."
(Sen. Edgardo J. Angara, "The Supreme Court in Economic Policy Making,"
Policy Review A Quarterly Journal of Policy Studies, Vol. 1, No. 1,
 January-March 1994, published by the Senate Policy Studies Group, pp. 2-
3.)

A further set-back in entertaining the petition is that it unfortunately likewise strikes at

factual issues. The allegations to the effect that irregularities have been committed in the
processing and evaluation of the bids to favor respondent PGMC; that the Malacaang
Special Review Committee did not verify warranties embodied in the contract; that the
operation of telecommunication facilities is indispensable in the operation of the lottery
system; the involvement of multi-national corporations in the operation of the on-line "hi-
tech" lottery system, and the like, require the submission of evidence. This Court is not a
trier of facts, and it cannot, at this time, resolve the above issues. Just recently, the Court
has noted petitioners' manifestation of its petition with the Securities and Exchange
Commission "for the nullification of the General Information Sheets of PGMC" in respect
particularly to the nationality holdings in the corporation. The doctrine of primary
jurisdiction would not justify a disregard of the jurisdiction of, nor would it permit us to now
preempt, said Commission on the matter.

Petitioners strongly assert, in an attempt to get the Court's concurrence in accepting the
petition, that since lottery is a game of chance, the "lotto" system would itself be a "crime
against morals" defined by Articles 195-199 6 of the Revised Penal Code.

Being immoral and a criminal offense under the Revised Penal Code, petitioners contend,
any special law authorizing gambling must, by all canons of statutory constructions, be
interpreted strictly against the grantee. Citing previous decisions of this Court, they
maintain that lottery is gambling, pure and simple, 7 and that this Court has consistently
condemned the immorality and illegality of gambling to be a "national offense and not a
minor transgression;" 8 "that it is a social scourge which must be stamped out;" 9 and,
"that it is pernicious to the body politic and detrimental to the nation and its citizens." 10

I most certainly will not renounce this Court's above concerns. Nevertheless, the Court
must recognize the limitations of its own authority. Courts neither legislate nor ignore legal
mandates. Republic Act No. 1169, as amended, explicitly gives public respondent
PCSO the authority and power "to hold and conduct sweepstakes races, lotteries, and
other similar activities." In addition, it is authorized:

c. To undertake any other activity that will enhance its funds generation,
operations and funds management capabilities, subject to the same
limitations provided for in the preceding paragraph.

It shall have a Board of Directors, hereinafter designated the Board,

composed of five members who shall be appointed, and whose
compensation and term of office shall be fixed, by the President.

xxx xxx xxx

Sec.9. Powers and functions of the Board of Directors. The Board of

Directors of the Office shall have the following powers and functions.

(a) To adopt or amend such rules and regulations to implement the

provisions of this Act.

xxx xxx xxx

(d) To promulgate rules and regulations for the operation of the Office and
to do such act or acts as may be necessary for the attainment of its
purposes and objectives. (Emphasis supplied).

In People vs. Dionisio, 11 cited by the petitioners themselves, we remarked: "What evils
should be corrected as pernicious to the body politic, and how correction should be done,
is a matter primarily addressed to the discretion of the legislative department, not of the
courts . . . ." In Valmonte vs. PCSO, 12 we also said:

The Court, as held in several cases, does not pass upon questions of
wisdom, justice or expediency of legislation and executive acts. It is not the
province of the courts to supervise legislation or executive orders as to keep
them within the bounds of propriety, moral values and common sense. That
 is primarily and even exclusively a concern of the political departments of
the government; otherwise, there will be a violation of the principle of
separation of powers.

The constraints on judicial power are clear. I feel, the Court must thus beg off, albeit not
without reluctance, from giving due course to the instant petition.

Accordingly, I vote for the dismissal of the petition.

KAPUNAN, J., dissenting:

I regret that I am unable to join my colleagues in the majority in spite of my own personal
distaste for gambling and other gaming operations. Such considerations aside, I feel there
are compelling reasons why the instant petition should be dismissed. I shall forthwith state
the reasons why.

Petitioners anchor their principal objections against the contract entered into between the
Philippine Charity Sweepstakes Office (PCSO) and the PGMC on the ground that the
contract entered into by the PCSO with the PGMC violates the PCSO Charter (R.A. No.
1169 as amended by B.P. Blg 427, specifically section 1 thereof which bars the said body
from holding conducting lotteries "in collaboration, association or joint venture with any
person association, company or entity."). However, a perusal of the petition reveals that
the compelling reasons behind it, while based on apparently legal questions involving the
contract between the PCSO and the PGMC, are prompted by the petitioners' moral
objections against the whole idea of gambling operations operated by the government
through the PCSO. The whole point of the petition, in essence, is a fight between good
and evil, between the morality or amorality of lottery operations conducted on a wide scale
involving millions of individuals and affecting millions of lives. Their media of opposition
are the above stated defects in the said contract which they assail to be fatally defective.
They come to this Court, as taxpayers and civic spirted citizens, asserting a right of
standing on a transcendental issue which they assert to be of paramount public interest.
Moral or legal questions aside, I believe that there are unfortunately certain
standards1 that have to be followed in the exercise of this Court's awesome power of
review before this Court could even begin to assay the validity of the contract between
the PCSO and the PGMC. This, in spite of the apparent expansion of judicial power
granted by Section 1 of Article VIII of the 1987 Constitution. It is fundamental that such
standards be complied with before this Court could even begin to explore the substantive
issues raised by any controversy brought before it, for no issue brought before this court
could possibly be so fundamental and paramount as to warrant a relaxation of the
requisite rules for judicial review developed by settled jurisprudence inorder to avoid
entangling this court in controversies which properly belong to the legislative or executive
branches of our government. The potential harm to our system of government, premised
on the concept of separation of powers, by the Court eager to exercise its powers and
prerogatives at every turn, cannot be gainsaid. The Constitution does not mandate this
Court to wield the power of judicial review with excessive vigor and alacrity in every area
or at every turn, except in appropriate cases and controversies which meet established
requirements for constitutional adjudication. Article VIII Sec. 1 of the Constitution
notwithstanding, there are questions which I believe are still beyond the pale of judicial
power. Moreover, it is my considered opinion that the instant petition does not meet the
requirements set by this court for a valid exercise of judicial review.

Our Constitution expressly defines judicial power as including "the duty to settle actual
cases and controversies involving rights which are legally demandable and enforceable,
and to determine whether or not there has been a grave abuse of discretion amounting
to a lack or excess of jurisdiction on the part of any branch or instrumentality of the
government." 2 This constitutional requirement for an actual case and controversy limits
this Court's power of review to precisely those suits between adversary litigants with real
interests at stake2 thus preventing it from making all sorts of hypothetical
pronouncements on abstract, contingent and amorphous issues. The Court will therefore
not pass upon the validity of an act of government or a statute passed by a legislative
body without a requisite showing of injury. 3 A personal stake is essential, which absence
renders our pronouncements gratuitous and certainly violative of the constitutional
requirement for actual cases and controversies.

The requirement for standing based on personal injury may of course be bypassed, as
the petitioners in this case attempt to do, by considering the case as a "taxpayer suit"
which would thereby clothe them with the personality they would lack under ordinary
circumstances. However, the act assailed by the petitioners on the whole involves
the generation rather than disbursement of public funds. In a line of cases starting
from Pascual v. Secretary of Public Works 4 "taxpayer suits" have been understood to
refer only to those cases where the act or statute assailed involves the illegal or
unconstitutional disbursement of public funds derived from taxation. The main premise
behind the "taxpayer suit" is that the pecuniary interest of the taxpayer is involved
whenever there is an illegal or wasteful use of public funds which grants them the right to
question the appropriation or disbursement on the basis of their contribution to
government funds. 5 Since it has not been alleged that an illegal appropriation or
disbursement of a fund derived from taxation would be made in the instant case, I fail to
see how the petitioners in this case would be able to satisfy the locus standi requirement
on the basis of a "taxpayer's suit". This alone should inhibit this Court from proceeding
with the case at bench. The interest alleged and the potential injury asserted are far too
general and hypothetical for us to rush into a judicial determination of what to me appears
to be judgment better left to executive branch of our government.

This brings me to one more important point: The idea that a norm of constitutional
adjudication could be lightly brushed aside on the mere supposition that an issue before
the Court is of paramount public concern does great harm to a democratic system which
espouses a delicate balance between three separate but co-equal branches of
government. It is equally of paramount public concern, certainly paramount to the survival
of our democracy, that acts of the other branches of government are accorded due
respect by this Court. Such acts, done within their sphere of competence, have been
and should always be accorded with a presumption of regularity. When such acts are
assailed as illegal or unconstitutional, the burden falls upon those who assail these acts
to prove that they satisfy the essential norms of constitutional adjudication, because when
we finally proceed to declare an act of the executive or legislative branch of our
government unconstitutional or illegal, what we actually accomplish is the thwarting of the
will of the elected representatives of the people in the executive or legislative branches
government.6 Notwithstanding Article VIII, Section 1 of the Constitution, since the
exercise of the power of judicial review by this Court is inherently antidemocratic, this
Court should exercise a becoming modesty in acting as a revisor of an act of the
executive or legislative branch. The tendency of a frequent and easy resort to the function
of judicial review, particularly in areas of economic policy has become lamentably too
common as to dwarf the political capacity of the people expressed through their
representatives in the policy making branches of government and to deaden their sense
of moral responsibility. 7

This court has been accused, of late, of an officious tendency to delve into areas better
left to the political branches of government. 8 This tendency, if exercised by a court
running riot over the other co-equal branches of government, poses a greater danger to
our democratic system than the perceived danger real or imagined of an executive
branch espousing economic or social policies of doubtful moral worth. Moreover
economic policy decisions in the current milieu- including the act challenged in the instant
case-involve complex factors requiring flexibility and a wide range of discretion on the
part of our economic managers which this Court should respect because our power of
review, under the constitution, is a power to check, not to supplant those acts or decisions
of the elected representatives of the people.

Finally, the instant petition was brought to this Court on the assumption that the issue at
bench raises primarily constitutional issues. As it has ultimately turned out, the core
foundation of the petitioners' objections to the LOTTO operations was based on the
validity of the contract between the PCSO and the PGMC in the light of Section 1 of R.A.
1169 as amended by B.P. Blg. 427. It might have been much more appropriate for the
issue to have taken its normal course in the courts below.

I vote to deny the petition.